Is Tk42 per kg import tariff keeping sugar prices soaring?

The government has recently cut fixed customs duty on the import of sugar, a key essential commodity, to keep its prices stable but the government's move turned futile as the prices have recently increased instead.

Attributing the fixed customs duty cut by 50 paisa per kg as minimal, importers say they still have to pay Tk42 as tariffs.

The industries ministry on 22 February revoked its decision hours after the announcement of the price increase of brown sugar produced by Bangladesh Sugar and Food Industries Corporation by Tk20 per kg. But in the meantime, sugar prices increased by Tk4-5 per kg as a result of the price hike decision, although it was later revoked.

According to traders, the price of sugar per maund (37.32 kg) has increased by Tk120-140 in the country's largest wholesale market Khatunganj in Chattogram over the last week. Average sugar prices per maund were at Tk5,000-5,020 yesterday which were at Tk4,880-4,900 a week ago.

Due to the increase, the prices rose by Tk5 per kg at the retail level. Enam Uddin, a shopkeeper of Kazir Deuri of the Chattogram city, told TBS that sugar prices rose from Tk140-145 in the market in the last week and are currently at Tk145-150.

Earlier on 8 February, the government cut fixed customs duty on sugar import from Tk1,500 to Tk1,000 per tonne meaning that per kilogram saw a 50-paisa cut.

The importers say the fixed customs duty cut by 50 paisa per kg had little impact on sugar prices. They say due to extra duty collection by the government they have to sell sugar at the local market at prices almost double compared to the international market.

Prodip Karon, DGM (Sales) of City Group, a conglomerate which imports sugar, said, "The recent duty cut has reduced the cost per kilogram by only 50 paisa. However, a duty of Tk42 is still being charged per kilogram of imported sugar. This includes 15% VAT, 30% regulatory duty and 2% advance income tax," he said.

Due to the additional duty and the high cost of paying for imports in US dollars, the prices of sugar in the domestic market are not decreasing, Prodip Karon explained.

According to data portal IndexMundi, the current booking price of sugar per kilogram in the international market is an average of 57.75 cents (equivalent to Tk69).

Even in various states of neighbouring India, sugar is being sold at Rs38-43 (equivalent to Tk50-57), according to ChiniMandi, a portal for the sugar industry. However, in the Bangladesh market, sugar is being sold at Tk145-150.

"The purchase price of per kg sugar from the international market is only Tk69, but the imposition of tariffs of Tk42 and transportation and refining expense of Tk12, it costs us Tk123 to reach the wholesale market. So, how can the sugar prices in the domestic market be compared with the international market or neighbouring countries?" a trader, who preferred not to be named, told TBS.

Importers hit by smuggled sugar

Taslim Shahriar, DGM of Meghna Group, a leading consumer goods importer, said the importers are the most affected due to the doubling of the sugar price difference with the neighbouring country.

"Because of this opportunity, sugar is being smuggled into the country illegally through the border. As a result, the sale of imported sugar has decreased."

Even though the price is not adjusted with the import cost, the price of imported sugar is decreasing due to the pressure of smuggled sugar, he said. "As a result, the importing companies are at risk of loss by importing sugar at a higher dollar price."

He said that 300 to 400 trucks of sugar are entering the country every day through the border areas. Of these, most of the sugar enters through the Sylhet, Moulvibazar, Brahmanbaria, Netrakona, Mymensingh, Jamalpur and Feni borders, said Taslim Shahriar.

He claimed that while Meghna Group used to sell 60-70 thousand sacks of sugar per day in normal time, the amount has now come down to 40 thousand due to the impact of smuggled sugar.

Police data also shows an increase in the smuggling of sugar into the country through the border. After the market became unstable last week, the police seized 140 sacks of Indian sugar from the Temukhi area of Sylhet.

Confirming the matter, Mohammad Saiful Islam, media officer of Sylhet metropolitan police, told TBS that the illegal supply of sugar through the border has increased recently. "So we are very careful about the matter."

In August 2023, the Bangladesh Sugar Refiners Association wrote to the foreign minister and various other departments requesting that the illegal supply of sugar be stopped.

The letter said that recently, low-quality sugar has been entering the country illegally from India. This is causing the government to lose revenue, and on the other hand, it is causing extensive damage to the domestic sugar industry, it said.

SM Nazer Hossain, co-president of the Consumer Association of Bangladesh, said that the production of state-owned and private sugar factories in the country is minimal. "As a result, sugar is now an import-dependent sector. Therefore, the government has to set reasonable tariffs to reduce the prices of this essential consumer product."

He further said, "Charging a duty of Tk42 per kilogram of sugar with an import price of Tk70 is tantamount to oppressing the consumers. He commented that the steps taken by the government to control the market are more of a show than reality."

He, however, said, "If the smuggling of sugar is to be stopped, the importers will also have to come out of the extra profit and sell the product at reasonable prices."

According to the Directorate General of Food, the current annual demand for sugar in the country is around 18-20 lakh tonnes. Of the quantity, the government mills used to produce one and a half to two lakh tonnes of sugar. However, due to the closure of production in six out of 15 government sugar mills, the current production has come down to below 50 thousand tonnes. Due to this, the country's sugar sector has become almost entirely dependent on private mills or importers.