Rice importers fear losses amid dollar crisis, demands full duty waiver

Highlights:

• Rice importers want full waiver of duty
• Duty was cut from 62% to 15% in two phases
• Private importers still fear losses if imported at this rate
• Private import of about 15 lakh tonnes of rice were allowed
• Only 3.60 lakh tonnes imported in six months
• Importers say banks reluctant to open LCs amid dollar crisis

Private importers of rice, who are already unable to open Letters of Credit (LCs) amid a dollar shortage, have demanded that the government waive all custom duties on the commodity to ease some of the market pressure.

They say they are not importing rice as banks are unable to open LCs amid the ongoing dollar crisis, while they are also making losses in the local market.

Amid these challenges, traders say a complete waiver of customs duties is the best course of action.

According to them, the levying of the duty – which was reduced from 62.5% to 15.25% in two phases – means an additional Tk5-8 per kg of rice. This added cost makes imported rice more expensive than domestically produced ones, resulting in losses for importers.

Shahidur Rahman Patwari, rice importer and senior vice-president of the Bangladesh Auto Major and Husking Mill Owners Association, told The Business Standard, "We have requested the food ministry to take steps to completely waive the duty on rice imports. Removal of customs duties will reduce import costs and lower priced rice will enter the market. This will increase the supply in the local market and prices will also fall."

Since the Ukraine-Russia crisis broke out, rice prices have spiralled in the market. Even though the Ministry of Food allowed imports of about 15 lakh tonnes of rice at a private level, only 3.60 lakh tonnes were imported in six months, sources said.

Recently, a meeting of the Bangladesh rice mill owners and importers was held with the Ministry of Food where the businessmen demanded the removal of all duties on rice.

In the meantime, the government has decided to import 50,000 tonnes of non-basmati parboiled rice through an LC under the international open tender method.

Traders have until 27 December to submit bids in the tender, according to a notice of Bangladesh's Directorate General of Food published on Monday.

But rice traders think their problem needs to be solved first.

Md Ismiel Hossain, secretary, Ministry of Food, told TBS, "Businessmen may have thought that the price of rice will come down when Aman paddy arrives. In that case, they would make a loss by importing rice. That's why the pace of rice import is slow."

"However, if we can bring at least 4-5 lakh tonnes of rice privately, we will be in a place of more comfort. That's why we keep trying."

Due to the increased price of rice in the country and the fear of global food crisis due to the Russia-Ukraine war, the government emphasised on increasing local production as well as collecting food grains from the international market.

In view of this, the government also allowed the private import of about 15 lakh tonnes of rice besides signing an agreement to import 5.30 thousand tonnes of rice from India, Vietnam and Myanmar.

The government also decided to reduce tariffs to facilitate private imports.

The Cabinet Division recommended to the National Board of Revenue (NBR) to reduce the duty on import of rice, after which the NBR reduced the 62.5% duty to 25% in the first phase.

This move also did not do much to normalise imports. Then the duty was brought down to 15.25% at the end of August. This facility was valid till 31 December, but the NBR extended it to 31 March.

Despite these benefits, the import of rice in the country did not increase much.

Traders claim that even though bankers do not officially prohibit opening LCs, they unofficially express their disapproval.

Meanwhile, officials of the Ministry of Food said due to the Aman season, the pace of private imports was somewhat slow. There was also apprehension about whether they would be able to bring rice and sell it in this paddy season.

Although private imports are low, government imports are normal.

According to the information of the Ministry of Food, 2.59 lakh tonnes of rice has arrived in the country against the agreement of importing 5.30 lakh tonnes of rice from the three countries. Another 2.12 lakh tonnes is in the pipeline.

The government has started procurement of paddy and rice from internal sources as well.

The government is set to buy 3 lakh tonnes of paddy from farmers and 5 lakh tonnes of rice from millers.

As of December 8, the government has secured an agreement to purchase 2.67 lakh tonnes of rice.

However, as the price of rice and paddy in the market is higher than the price announced by the government – paddy at Tk28 per kg and rice at Tk42 per kg – even government purchases are at risk.

The millers who are contracting with the government will be obliged to supply this rice even if they incur losses, with penalties faced if they fail.

At present, the government has 16.39 lakh tonnes of rice and wheat in stock, according to the data of the Ministry of Food.