Bangladesh : Ending chronic crisis in edible oil market
Bangladesh is facing a cooking oil shortage, with soybean oil particularly scarce. Despite government efforts like VAT reductions, refiners have manipulated supply, creating artificial shortages. After rejecting their price hike proposal, the government is stuck between controlling prices or conceding to industry demands. Long-term solutions like boosting local production and stockpiling oil are being considered.
The very essential commodity in the kitchen, cooking oil, which always becomes more essential during the holy month of Ramadan, has recently gone out of market for no good reason. This is happening at a time when the prices of soybean and palm oils are reportedly falling in the international market. Meanwhile, to keep prices of this kitchen item low, the interim government reduced the Value-Added Tax (VAT) on it twice bringing it down to 5.0 per cent from 15 per cent since mid-October last year after assuming office. But the insatiable thirst of the refiners and suppliers of this essential commodity for making more profit when the time is opportune could never be satisfied by any government, past or present, by granting tax and duty exemptions. Tax waivers apart, the successive governments have also taken strict measures including penalising traders for selling this essential kitchen item above the prices fixed by the government or for stockpiling it to create artificial crisis in the market, but to little or no avail so far. So, it is not surprising that these powerful dealers in edible oils are at it again, leaving the government clueless about how to tackle this hardened group of profiteers who can hold the entire population hostage to their narrow, selfish end.
It may be recalled that on December 9, 2024, the government had to raise the price of soybean oil by Tk8.0 per litre against the backdrop of disappearance of bottled soybean oil from the shelves of the retail shops. Then the price of bottled soybean oil was fixed at Tk175 per litre and that of loose soybean oil as well as super palm oil at Tk157 per litre. Later, it was also decided at a meeting between the commerce ministry and leaders of edible oil industry that thenceforth price of oil would be readjusted every month. At that time, the sudden supply crisis was attributed to the reduced import by edible oil importers on the ground that the import costs were very high despite the tax waivers.
Following that price hike, the edible oil traders’ association again approached the commerce ministry with a proposal to raise the price of soybean and palm oil price by Tk 15 per litre. In this connection, they met the Business Advisor Sheikh Bashir Uddin on January 23, but no decision came from that meeting. The matter was then referred to the Bangladesh Trade and Tariff Commission (BTTC) to come up with a report on the issue. However, regarding traders’ proposal for further hike in oil price, the chairman of BTTC is learnt to have said that prices of soybean oil would not be increased during the Ramadan. Against this backdrop, this new supply crunch in the edible oil market is again being observed across the nation. The small neighbourhood retailers or grocers are complaining that the distributors of soybean oil have drastically reduced the frequency of delivery to their end. Wholesalers are also making similar complaints. Worse, they said that they are even being forced to buy other commodities from the refiners as a condition for getting the supply of oil. As expected, the wholesalers are then compelling small retailers to buy additional items when receiving oil supply from distributors. Why should the retailers take the burden alone? So, they are also asking the general consumers to take other items in addition to oil. This is indeed a kind of extortion chain the refiners have established in the edible oil market and the ultimate victims of which are the consumers. In this regard, both wholesalers and small retailers are of the view that the current crisis in the soybean oil market has been created deliberately following the government’s rejection of the edible oil industry people’s proposal to increase soybean oil price by another round.
In this connection, the millers or refiners’ argument is as usual. They are for adjusting domestic prices of soybean and palm oil with those of international market. Especially, falling value of Taka against US dollar, they argue, is the reason requiring them to upwardly adjust edible oil price. But as the government has not responded to their proposal positively before the upcoming Ramadan, the edible oil lords have returned to their old tactics of creating artificial supply crisis in the market.
So, what will the government do? Bow down to the edible oil cartel’s demand, or stick to its stance of keeping the edible oil prices stable during the Ramadan? Seeing that all the enforcement measures applied in the past including strict market monitoring, use of mobile court to penalise errant oil traders in the kitchen market and so on have failed to produce any result so far, what new ideas is the government left with to calm the volatile edible oil market? While the government will be required to think long and hard to get around the ongoing supply crisis, it should also try to find out a long-term solution to this chronic problem afflicting the edible oil market. If it cannot be resolved by holding occasional meetings with the oil merchants, or enforcement of law, then the government should create substantial stockpile of edible oil of its own for releasing it in the market through TCB to keep the market cool. As part of the long-term solution to the issue, local production of edible oil has to be increased by providing necessary incentives to farmers. Notably, out of the annual demand for edible oil amounting to around 2.4 million tonnes, the country produces only 0.25 million tonne. So, the local production of oil should at least be doubled to strengthen domestic capacity. This would, to a large extent, reduce the country’s dependence on imported oil and help arrest the commodity’s arbitrary price hike.
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Source : The Financial Express
