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Rising prices of essential amidst stock shortage

Mahedi Hasan Murad

Mahedi Hasan Murad

Sun, 8 Dec 24

The government has waived tariffs on six essential commodities to curb abnormal price hikes. However, despite 1.5 months of tariff reductions, imports have not significantly increased. As a result, while the prices of a few items have dropped slightly, most essential goods remain costly.

Meanwhile, the domestic collection of rice and wheat has significantly declined, and food grain imports have also decreased. Consequently, food stocks in government warehouses are dwindling.

Importers and traders claim that the tariff cuts and import permissions have stabilized the market.

However, experts warn that slow domestic procurement and reduced imports could jeopardize food security. If the situation does not improve promptly, rice prices may rise, impacting people's daily lives.

Declining Food Stocks

According to the Ministry of Food, government food reserves stood at 1.167 million tons on November 27 but fell to 1.09 million tons by December 3. This marks a reduction of 77,000 tons in just five days, or an average of over 15,000 tons per day. However, daily procurement is only 1,714 tons.

Four months ago, government food reserves were nearly 1.8 million tons, almost double the current stock. In this period, reserves have decreased by 800,000 tons.

Currently, the reserves consist of 6.69 million tons of rice, 4.20 million tons of wheat, and only 1,000 tons of paddy.

This Aman season, the government aims to procure 1 million tons of paddy, rice, and wheat. However, between November 17 and December 3, only 24,000 tons were collected, averaging 1,714 tons daily. The required daily collection is over 11,000 tons, raising concerns about meeting the target within the stipulated timeframe.

Slow Imports

To ensure food security, Bangladesh needs to import an average of 552,000 tons of food grains monthly. However, imports have slowed significantly this fiscal year. In FY 2023-24, 6.628 million tons of food grains were imported, all of which were wheat. Rice imports have been minimal.

During FY 2022-23, 1.056 million tons of rice were imported. This fiscal year, only 2.262 million tons of food grains have been imported in the first five months, meeting just 31% of demand. Private rice imports stand at a mere 23,310 tons, which is negligible compared to the requirement.

Despite assurances from the Ministry of Food, officials warn that government food reserves could face a deficit of 1.1 million tons by July. Although the government has removed tariffs on rice imports, private importers have shown little interest due to high global prices.

Impact on Essential Commodities

Rice

To encourage imports, the government has reduced tariffs on rice, cutting the import duty from 25% to 15%, regulatory duty from 25% to 5%, and waiving the 5% advance tax. Despite granting permission to import 1.5 million metric tons of rice, only 15,000 metric tons have been imported.

As a result, the price of coarse rice has decreased by 2 BDT per kilogram over the past month, while medium and fine rice prices have increased by 3-4 BDT. In retail markets, Pajam and Miniket varieties are sold at 70 BDT per kg, Basmati at 65 BDT, Kataribhog at 85 BDT, and Atash at 62-64 BDT.

Edible Oil

The government has reduced import duties on soybean and palm oil twice, bringing the tariff down to 5%. This has reduced costs by 10-11 BDT per kilogram. However, global price hikes have pushed retail prices up. Loose soybean oil is now sold at 167 BDT per liter, up from 156 BDT, while loose palm oil costs 155 BDT per liter, up from 146 BDT.

Sugar

Import duties on raw sugar have been reduced by 15-17 BDT per kilogram, bringing the tariff to 23 BDT per kg. However, despite increased imports, retail sugar prices have risen. Packaged sugar now sells at 140 BDT per kilogram, while loose sugar is priced at 135 BDT, up from 130-135 BDT.

Onion

The government has reduced onion import duties twice, leading to an increase in imports. Over the past month, 77,000 tons of onions were imported, compared to 61,000 tons during the same period last year. However, imported onions still cost 100 BDT or more per kilogram in retail markets.

Potatoes

Despite waiving tariffs on potato imports in September, only 40,000 tons of potatoes have been imported so far, which has had minimal impact on the market. Retail prices have risen by 10 BDT per kilogram within a week, with potatoes now selling for 75-85 BDT per kg.

Eggs

The government reduced import tariffs on eggs from 25% to 5% in October. Although import approvals were granted for 550 million eggs, only 10 million have been imported so far. Retail prices have risen again, with eggs now selling for 150-155 BDT per dozen, up from 145 BDT.

Expert Recommendations

Agricultural economist Dr. Jahangir Alam Khan suggests accelerating Aman procurement to stock at least 1.5 million tons of rice. He emphasizes that the current reserves are insufficient for the country’s needs.

With Ramadan approaching in March, timely measures to increase imports are critical. Bangladesh Bank has already eased import conditions for Ramadan commodities by relaxing L/C terms.

Swift action is necessary to address the food stock deficit and stabilize the market to prevent further inflation and supply disruptions.

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