Private companies wrest sugar market from state-owned factories

Private companies are increasingly taking control of the sugar market and hiking prices at will as a result of a shortage of supply from state-owned sugar mills and the imprudent decisions of the Bangladesh Sugar and Food Industries Corporation (BSFIC).

Six out of 15 state-owned sugar mills were shut down in 2020 due to raw material crises and continuous losses.

Traders have complained that the BSFIC fixes the price of sugar without adjusting it with that of sugar from private factories. As a result, dealers are repeatedly incurring losses due to the price differences.

Moreover, most of the dealers' collateral has come down to almost half as they have been fined Tk200 per tonne over their failure to collect the allotted sugar on time. Due to such factors, the traders are inclined to cancel dealerships.

Anwar Hossain, joint general secretary of the Bangladesh Sugar Dealers Business Association, said BSFIC dealers play an active role in controlling the country's sugar market. However, in the recent past, some of the state-owned sugar mills stopped production and many dealers have taken their collateral back. As a result, through abusing the situation, private companies have been manipulating prices of sugar.

Khatunganj wholesale sugar trader Mohammad Nurul Alam said the price of sugar has been rising for the last one month even though the price has much not increased in the international market. Earlier there was a public-private competition in setting prices in the market, but the supply of state-owned sugar has decreased, leading to the current difficulties.

According to the BSFIC, there were 5,360 registered BSFIC dealers in the country. In the last 2-3 years, 3,526 people (65%) have cancelled their dealerships and applications seeking cancellations of dealership have been increasing every year.

In 2020, 350 dealers applied to the corporation to have their dealerships cancelled, with 200 dealers applying for the cancellation in October and November.

In the last two months, the BSFIC has cancelled the dealerships of 60 people and returned their security deposits. However, due to the financial crisis, the corporation could not return the collateral to the remaining applicants.

Acknowledging the matter, BSFIC's Chief Marketing Officer Mazhar-ul-Haq Khan said due to a depletion of stocks, a limited amount of sugar is being allocated. Many have applied for a cancellation of their dealership out of frustration. However, in the financial crisis, it is not possible to return the collateral money to everyone at once.

He added that the BSFIC's sugar marketing activities will revive if the state-owned sugar mills are fully operational.

In Khatunganj, the country's largest wholesale market for consumer goods, sugar is currently being sold at Tk2,330-2,350 per maund (37.32 kg). The price was Tk2,000 a month ago. As such, the wholesale price of sugar has gone up by Tk350 per maund in a month.

In the market, S Alam Sugar is currently being sold at Tk2,330, Meghna Group Fresh sugar at Tk2,330 and Citigroup's Igloo brand sugar at Tk2,325.

According to the BSFIC and TCB, the total demand for sugar in the country is 15-17 lakh tonnes per year. The supply of around 1.5 lakh tonnes of sugar comes from state-owned factories. Moreover, the government imports some sugar through TCB at different times of the year. In other words, about 7-8% of the demand for sugar is met by the government.

In 2019-20, the government set a target of 1,15,000 tonnes of sugar production in 15 mills, but production turned out to be only 82,000 tonnes. As six mills are closed this season, sugar production is set to further come down to 60-65,000 tonnes.

Meanwhile, the amount of sugar in BSFIC's stock has also come down alarmingly. On 1 July, the corporation had 56,030.91 tonnes of sugar in stock. As of 13 December, the stocks dropped to 40,000 tonnes. Of this amount, a total of 14,500 tonnes has been reserved for the Army, Navy, Police, BGB, Fire Service and Mills Ration in the 2020-21 financial year. As a result, reserves have come down to 25,000 tonnes.