Drop in duty, int’l rate fails to sweeten sugar prices
Traders say sugar market is held hostage by a few companies
- Import duty of raw sugar was halved in Nov
- Booking price has come down by $100 per tonne
- Millers blame LC restriction, dollar rate for no price change
- Small businesses unable to import sugar
- Bangladesh has 18-20 million tonnes annual demand for refined sugar
- Over 98% of sugar has to be imported every year to meet demand
The government's attempt to curb sugar prices by slashing import tariffs by half appears to have had no impact in the country's kitchen markets as the commodity's price shows no signs of abating even amid lower booking rate.
On top of that, a $100 dip in the international booking rate has failed to dent sugar prices in the Bangladesh market. On the contrary, the wholesale price has increased by Tk400 per maund (37.32 kilograms) and retail price by Tk10-15 per kg in a month.
On 1 November, the revenue board halved the duty on sugar import – from Tk3,000 to Tk1,500 per tonne for raw sugar, and from Tk6,000 to Tk3,000 per tonne for refined sugar. The move was intended to stabilise the price of sugar ahead of the upcoming national elections.
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According to traders, the country's sugar market is held hostage by a few groups of companies. Therefore, the price of the product is not decreasing even after a reduction of duty or the international market booking rate.
Alamgir Parvez, owner of RM Enterprises at Khatunganj wholesale market in Chattogram, said although the duty was reduced about two months ago, the price has not decreased by even one taka since then.
"Instead, after a reduction in the price, the price increased in the middle. And for the past one month, the product is being sold at an increased price," he added.
He also pointed out that many small and medium importers in the country used to import sugar previously. However, due to the dollar crisis, these smaller businesses are now unable to open letters of credit (LCs) for importing goods.
"This has led to conditions where the consumer goods market is controlled by a handful of importers," the sugar trader added.
Biswajit Saha, director of corporate and regulatory affairs at City Group, expressed a similar view, stating that the unchanging sugar prices are a result of a shortage of dollars.
"To open LCs, one has to go from one bank to another. Even if a bank allows opening an LC, the dollar exchange rate has to be calculated at Tk118-Tk122," he explained.
Besides, the LC margin has to be paid at a high rate of 120%-150%. Due to these factors, the sugar price cannot be reduced, even if the international market booking rate for raw sugar decreases or the import duty is lowered, said the official of the commodity importer.
No impact of lower booking rate
Mohammad Bashar, sugar importer and the owner of Ahad Trading at Khatunganj market, said the booking rate of sugar on the international market has decreased to $100 per tonne in the last two months.
He said the rate was $680 per tonne in early November, which has now come down to $580.
Retailer Mohammad Absar, owner of the grocer Jannat Store in Chattogram, said, "On Tuesday, we purchased sugar from Khatunganj at Tk5,100 per maund. Including transportation costs, the total cost per kg of sugar reaching our store amounts to Tk138. We are selling it at Tk145-Tk148."
Sugar import situation
Bangladesh has an annual demand of around 18 to 20 million tonnes of refined sugar. Of this, only 1 lakh tonnes of raw sugar comes from the state sugar mills, according to the Bangladesh Sugar and Food Industries Corporation.
In the last financial year (FY23), only 21,300 tonnes of sugar was produced in 15 state-owned sugar mills. The remaining sugar demand was met by imports.
According to demand and import data, more than 98% of sugar has to be imported every year to meet the country's demand.
Five industrial groups in the private sector – City, Meghna, S Alam, Abdul Monem Limited, and Deshbandhu Sugar Mills – import raw sugar. Later, they refine it in their mills and bring it to the market.
According to the data of the National Board of Revenue, from 1 January to 20 December this year, six importers including the above five millers imported 19.14 lakh tonnes of sugar.
And, during this 50-day period of half import duty (1 November-20 December), the five millers imported 2.96 lakh tonnes of raw sugar, paying Tk44.34 crore less than what would have been needed before the duty reduction.
