Syndicate keeps edible oil prices higher in Bangladesh despite fall abroad

The fall of edible oil prices abroad has not changed prices in Bangladesh market.

Shaikh Abdullahbdnews24.com
Published : 21 Sept 2014, 11:18 AM
Updated : 21 Sept 2014, 02:49 PM

Exporters have explained the current prices saying there was no import of edible oil after prices fell in the international market.

But an official of the Tariff Commission, choosing to stay anonymous, told bdnews24.com that businessmen ‘have united’ in their efforts to retain the earlier prices of the essential despite the low prices abroad.

The price of unrefined soyabean oil has come down by 37 percent within the span of a year, according to the Commission’s report. Palm oil costs 17 percent less, it said.

Businesses in Bangladesh import soyabean and palm oil, refine them in their facilities and sell them in the market with or without packaging.

Unpacked soyabean oil prices have come down by 17 percent in the domestic market and the bottled ones by 7 percent, according to data by the Trading Corporation of Bangladesh (TCB) – the government’s trading arm.

There was demand for 1.4 million tonnes of edible oil in the country and 250,000 tonnes are produced at home, said a report by the Ministry of Commerce.

Businesses have opened Letter of Credit (LC) for import of 357,000 tonnes of soyabean oil in the 2013-14 fiscal and 287,000 tonnes of that have been already resolved, the Bangladesh Bank says.

Meanwhile, LCs to import 1.093 million tonnes of palm oil were in the books and 801,000 tonnes of that was resolved.

In the first two months (July-August) of the ongoing 2914-15 fiscal, LCs to import 63,000 tonnes of soyabean oil were opened while 33,000 tonnes of those were resolved.

For palm oil there were LCs to buy 167,000 tonnes and 137,000 tonnes of that was resolved.

Voluntary Consumer Training and Awareness Society (Consumer) Executive Director Khalilur Rahman Sajal told bdnews24.com, “Our misfortune is that out prices don’t proportionally fall even if it does in the outside market. But it goes up when it does.

“The reason behind this is that the businessmen who make imports form syndicates. There are four to five people who control the market for edible oil here.

“There is no competition in the market. If the laws regarding fair competition were active then these companies would not have been able to act in this manner.

“But the government does not have these tools. TCB is not able,” he said.

Prices in the local market are meant to rise or fall in keeping with the international market as prices are also moulded by the process to refine these edible oil.

The businesses importing commodities have also been getting low-interest foreign loan for buyer’s credit.

Bangladesh businessmen import edible oil from Malaysia, Indonesia, Brazil and Argentina.

Salauddin Ahmed, general manager of S Alam which imports and refines edible oil, told bdnews24.com, “You can compare the domestic price of loose oil with the international market. It will show that domestic firms have been selling oil at a cheaper rate.”

“But packed oil prices won’t match. Because packing, marketing and transport costs add to the production price.

“The everyday demand for edible oil is almost 4,000 tonnes. Twenty percent of that is for packaged oil and the rest are sold unpacked.”

Ahmed said there was no difference in international and domestic prices of edible oil.

“The main domestic market for edible oil here is at Dhaka’s Moulavibazar and Chittagong’s Khatunganj. The businessmen there wake up in the morning and check the commodity markets in Chicago and Malaysia.

“They then make assumptions on when the products will reach home, how much they will cost… they keep account of all those. So we can’t sell for a higher prices even if we want.”

S Alam refines 400 tonnes of edible oil per day, Ahmed said.

Biswajit Saha, General Manager at City Group, the largest distributor of edible oil in Bangladesh, said, “Oil prices have reduced a lot. Palm oil now costs Tk 2,400 instead of Tk 2,700 per maund and soyabean oil was being sold at Tk 3,000 instead of Tk 3,300 per maund.

“So they cost Tk 8 to Tk 9 less per kilogram than before.”

“But domestic markets have not yet bought oil at a lower price. More than 200,000 tonnes of oil imported during Eid have not been released yet.

“There is not syndicate here… prices are low in the international market, now everyone has to sell off whatever they have in store.

“There is the issue of banks loans, there will be loss if prices are lowered – all these matters the most.”

City Group refines nearly 2,000 tonnes of edible oil every day.

Businessmen have provided their logic for current prices but many consumers have lashed out at the government.

They say businessmen stifle the public because of a form of ‘veiled support’ they get from the government.

Rafikul Islam who works at a private firm in Dhaka spoke his mind.

“There is a lack of interest from the government when it comes to securing fair prices of commodities for the public. They promised to keep the prices stable before the election. They made their manifesto out of it.

“But they have formed alliance with businessmen now that they are in power. Some are looting banks under the shadow of their influence, some are looting the marketplaces.”