Bangladesh took so long to start rice imports, says economist

The government, now scrambling to fill up rice reserves, should have worked on increasing import much earlier, an expert has said.

Import duty on rice was slashed to 10 percent, from the existing 25 percent, to encourage private traders to purchase more from abroad, the latest in a series of steps to curb prices.

Commerce Minister Tofail Ahmed announced the decision on Tuesday, hoping it would stabilise the market. “The government has also decided to buy rice.” 

 The duty was in place to ensure fair prices for farmers, but flash floods in April destroyed their yield, he said. “So the prime minister had ordered the cutback on duty. A formal notice will be out soon.”

But mill and store owners had already price-gouging after finding out about the shortage in government reserves, agriculture economist M Asaduzzaman told bdnews24.com.   

The latest decision will, however, force this syndicate to release their stores, which would hopefully normalise the market. “The market’s panic will basically end,” he said.

The government, meanwhile, maintained that there was no shortage and the prices were raised by businesses to create an artificial crisis.

“Nearly 20 million tonnes of Boro rice was produced this year. The time to harvest Aush rice is nearing, all this grain is or will be with someone within our country,” said Ataur Rahman, additional secretary at the food ministry. 

“This is why we keep saying that there is no crisis.”   

The government also decided to withdraw the 3 percent regulatory duty, a contentious issue that discouraged the traders from importing rice.

Rice imports by private traders slumped 58 percent year-on-year to 103,200 tonnes between July 1 and May 25 of the outgoing fiscal year, according to the Food Planning and Monitoring Unit. The imports are the lowest in four years.

In December 2015, the government increased customs duty on rice imports from 10 percent to 25 percent to discourage imports. The total duty amounts to 28 percent when 3 percent regulatory duty is added.

"We hope the decisions will help ease prices very soon. The government has already decided to import rice,” Ahmed said.

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Separately, the government seeks to import more food grains as it has floated new tenders to procure 100,000 tonnes of rice and wheat amid criticism over the price shock.

The Directorate General of Food posted two separated tender notices on its website on Tuesday, just ten days before this fiscal year ends.

The government has invited bids from international traders to import 50,000 tonnes of non-basmati parboiled rice.

The rice tender, which closes on Jul 9, is the fourth in the outgoing fiscal 2017.

The latest tender brings the amount of rice to 200,000 tonnes Bangladesh is seeking to procure from outside in the year ending Jun 30.

The second tender floated by the state grains buyer on Tuesday is to import 50,000 tonnes of wheat. Suppliers have been told to submit bids by Jul 11.

Until Jun 18, the government had 486,000 tonnes of food grains in stock, with rice amounting to around 181,000 tonnes.

The depleting reserves have caused rice prices to spiral out of control with millers and wholesalers blaming each other.

Bangladesh also gave the green light for a purchase of another 250,000 tonnes of rice from Vietnam under a government-to-government deal.

The government hopes rice prices will ease once imports arrive in the market.

Government data, often lower than market prices, shows a 47 percent rise in the price of coarse rice while a fine variety saw around 20 percent rise in a year.

Bangladesh Bank on Monday instructed banks to allow private traders to import rice without any deposit against letters of credit or LC margin.

The decision is meant to ensure rice supply to local markets in the aftermath of crop losses in recent flash-floods, the central bank said in a statement.

The new rules will remain in force until Dec 31, which will allow the traders to import rice first and make the payments afterwards.