Tariff Commission proposes reducing sugar duty to curb smuggling

The Bangladesh Trade and Tariff Commission has proposed reducing import duties on sugar to combat smuggling and lower domestic prices.

Currently, sugar prices in India range from Tk45 to Tk50 per kg, while in Bangladesh, it costs Tk125-130. The significant price difference, coupled with high import duties, has led to a decrease in legal sugar imports and a surge in smuggling.

To address this issue, the commission has recommended that the National Board of Revenue cut import duties and increase border surveillance to curb smuggling.

According to a Tariff Commission report obtained from commerce ministry sources, Bangladesh imported an average of 18.43 lakh tonnes of raw sugar per year over the last five years. However, in the fiscal 2023-24, the country imported 4.57 lakh tonnes fewer than the average, and refined sugar imports decreased by 13,000 tonnes. 

Despite this decline in legal imports, there is no shortage of sugar in the market, indicating that smuggling is filling the gap.

The report highlights that sugar is likely being smuggled from India, where prices are significantly lower. Reports of sugar seizures by law enforcement in border areas further confirm suspicions of smuggling.

In this situation, the commission's review has indicated that reducing the current 30% regulatory duty (RD) on sugar imports to 15% will not result in a loss of revenue for the government from this sector. 

Additionally, the commission has recommended that law enforcement and other relevant agencies be given instructions to increase surveillance in border areas to control informal sugar imports.

Analysing the impact of high tariffs, it noted that even with a reduction of over 4.5 lakh tonnes of sugar imports in FY24 compared to FY23, government revenue collection has increased. This is attributed to a rise in the average import price of raw sugar, which increased by 35.20% from Tk48,131.87 per tonne in FY23 to Tk65,076.38 per tonne in FY24.

Under the current tariff structure, the estimated revenue from importing one tonne of raw sugar is Tk30,770, indicating that nearly half of the cost of importing each ton of sugar goes toward government revenue. Meanwhile, consumers are under pressure as they are forced to buy sugar at higher prices.

An import of one tonne of raw sugar incurs a customs duty of Tk3,000, alongside a 15% VAT, a 2% advance income tax (AIT), a 30% RD, and a 5% advance tax (AT). For refined sugar, the customs duty is Tk6,000 per tonne, along with a 15% VAT, a 5% AIT, a 30% RD, and a 5% AT.

Moreover, over the past month, the price of sugar in the international market has increased by 20.81%, reaching $476.19, according to information from the Ministry of Commerce. The abnormal rise in import prices is seen as a major reason for the increase in local market prices. 

The commission has identified two reasons for the increase in import prices— one is the rising price of sugar in the international market, and the other is the appreciation of the dollar against the taka. These factors have primarily contributed to the decline in the volume of legally imported sugar.

The commission states that the rising prices in the international market are beyond the government's control, and the complexities of the increasing dollar value cannot be managed overnight. In this situation, if sugar prices can be reduced by lowering tariffs and taxes, it would lead to a decrease in smuggling and encourage legal imports.

Taslim Shahriar, deputy general manager of Meghna Group of Industries, told TBS, "If import duties are reduced, sugar prices in the domestic market will decrease somewhat, and at the same time, increased imports will also boost government revenue collection."