Since the end of the pandemic, millions of Bangladeshi household consumers, especially those in the middle and low-income brackets, have been feeling the extreme pressure of soaring prices of their essentials as rising inflation has been gobbling up most of their incomes.
The ascending bills of their groceries and energy usage mean they are cutting back on little luxuries and, in most cases, even the essentials.
The narrative spun by the government to explain the cost of living crisis also kept changing.
At some point, it was the shortage of US dollars in the market and the rapid depletion of US dollar reserves. To deal with that crisis, the government rolled out the strictest austerity and belt-tightening in living memory, devalued the local currency and issued executive orders which helped propel the energy costs to a sky-high limit.
It did not work.
Instead, the consumer price index rate kept breaking records every month, and people from almost all walks of life suffered.
Then Russia invaded Ukraine.
Indeed, the war has affected the global market to some extent since both the warring parties are two of the major growers and suppliers of grains and grain-based items worldwide.
To add insult to injury, the shipping costs for products went up as a side-effect of the war, which means the prices of imported essentials, raw materials, and luxury items went quite significantly up.
Since the first bullet was fired in the war, Bangladesh policymakers have been spinning this fact as the sole reason why Bangladeshi households struggle to put food on the table.
bdnews24.com discovered that those mentioned above are not the only reasons why the inflation became so unbearable for millions of Bangladeshis.
The government’s policy in setting prices, especially for essentials, is somewhat aiding marketers to gouge prices to their whims.
HOW DOES THE BANGLADESH GOVERNMENT SET THE CEILING OF PRICES?
Whenever the issue of price rise is debated in the public sphere, the concerned policymakers of the Bangladesh administration pushed a term called ‘reasonable profiteering’ for marketers.
bdnews24.com found a list of items published by the Bangladesh Department of Agricultural Marketing, or DAM, which shows the price ceiling of the products on the list are in most cases double the cost of growing or manufacturing, in some cases almost 2.5 times, which, according to the DAM is “reasonable profit.”
The products on the list range from rice, lentil, vegetables, fish, eggs, milk and processed food.
DAM protocols say that in every district, a 16-member committee that involves the deputy commissioner, superintendent of police, deputy director of the Department of Agricultural Extension, livestock and fisheries officer of the district, food controller of the district and senior officer of DAM,
Two economists bdnews24.com had spoken to categorically said the price ceiling set by the government, according to the list, is “excessive”, which is putting severe pressure on Bangladeshi consumers.
bdews24.com chased the director general of DAM for a month for his comment on the matter. He even cancelled pre-agreed appointments at the last minute.
When approached, another top DAM executive at first dismissed the notion saying that they do not have such provisions of price ceiling in place. When he was shown the list and the protocols for setting the prices on government memos, he backed off and refused to make any comment on the record, saying he was “not authorised” to comment on the matter.
HOW THIS ISSUE BECAME A HOT-BUTTON TOPIC?
It was the skyrocketing prices of broiler chicken, which in reality is a significant source of protein for Bangladeshis at the moment, which brought the issue of ‘reflation’ to the fore.
The Directorate of National Consumer Rights Protection intervened, and in the face of rigorous grilling at a public hearing, one of the top marketers conceded on the record that their production cost of each kg of broiler chicken is Tk 130-140, which at that point, they were selling at Tk 250-280, literally double the cost of production.
The DAM list, however, does not include the prices of broiler chicken.
The government, from time to time, adjusts the price ceiling of edible oil, sugar and liquefied petroleum gas. However, the criteria for setting those prices, mainly the maximum profit percentage, are never published. The organisations which work for consumer rights are kept from the meetings of these price settings.
The most interesting episode, however, was observed in the recent case of sugar price setting.
The price was set for commercial sellers at Tk 120 per kg, while the government is importing sugar for Trade Corporation of Bangladesh from an American company at Tk 82 per kg.
GRAIN PRICES ARE DOUBLE THE COST OF PRODUCTION
For grains, the “reasonable profiteering” rate for marketers is almost twice the production cost.
The DAM list dictates that the prices can be set with a 30 percent profit margin at the production level of grains.
This means if the production cost of a grain item is Tk 100, the producer can charge a maximum of Tk 130 for the item.
Meanwhile, wholesalers can keep a maximum profit margin of 15 per cent and can sell it to a retailer at a maximum of Tk 149.50.
Retailers can keep a maximum profit margin of 35 per cent, which means they can sell it to consumers at a maximum of Tk 186.87.
For processed items like puffed rice and flour, the journey of price rises is almost 2.5 times.
THE WILD MARKET FOR VEGETABLES
Following the same logic, the prices reach double the production cost for potatoes and vegetables during their journey to the consumers’ hands.
Growers can keep a maximum markup of 40 per cent, while wholesalers and retailers can keep a maximum profit of 25 and 30 percent, respectively.
This means if a vegetable item’s production cost is Tk 100, it would cost Tk 227.50 when it reaches a consumer’s kitchen.
For spices, growers, wholesalers, and retailers can keep a maximum markup of 40, 20 and 30 percent, respectively.
If a spice item’s production cost is Tk 100, it would cost Tk 218 by the time it reaches a consumer’s kitchen.
For fruit, growers, wholesalers and retailers can keep a maximum markup of 30, 20 and 30 percent, respectively.
This means if a fruit item’s production cost is Tk 100, it would cost Tk 202 when it reaches a consumer’s table.
COOKING OIL, EGG, FISH
The producer is allowed to make a profit of 30 percent on cooking oil made from mustard, sesame seed, nuts, coconut, sunflower and soybean.
The government considers it reasonable for cooking oil wholesalers to keep a 15 percent profit margin and retailers 30 percent.
It means a refiner can sell cooking oil to dealers at Tk 130 if the production cost is Tk 100; dealers can sell it to retailers at Tk 159.50, and the retailer Tk 194.
Although the margin for sugar has not been mentioned, it is 35 percent for molasses at the production level, 15 percent at wholesale and 30 percent at the retail level. This means the retail price can be Tk 201 if the production cost is Tk 100.
For fish, the price can increase by 30 percent at the production level, 15 percent at wholesale and 25 percent at retail, meaning the ultimate price will be Tk 186 in case of Tk 100 production cost.
The rates are the same as fish for egg, milk, lentils, vermicelli, fruit juice and chips.
The reasonable profit margins set by the Department of Agricultural Marketing is “obviously high”, according to Professor Md Akhtaruzzaman Khan, dean of the agricultural finance faculty at Bangladesh Agricultural University.
“A 30 percent profit margin for farmers is okay, but it’s meaningless to keep the rate above 15 percent for wholesalers because a huge amount of products are traded on the wholesale market. Similarly, a 25 percent profit at the retail level is illogical.”
He said traders tend to profit more than they are allowed, and so they are making 40 percent profit when the highest rate is fixed at 25 percent. If the rate had been fixed at 5 percent, they would not have raised the margin beyond 10 percent, he believes.
Prof Akhtaruzzaman, who did his PhD research on agricultural finance in Japan, said the East Asian nation keeps the market stable by marketing agricultural products through a cooperative society, which controls 70 percent of the market.
Those holding the rest of the market cannot make an extra profit due to competition with the cooperative society, he said.
He suggested marketing agricultural products by the government department to keep prices competitive. The department would need adequate infrastructure to preserve these products in that case, he pointed out.
The agriculture and food ministries should also make a policy and set the profit margins at logical levels, he said.
WHAT DOES THE GOVT SAY?
bdnews24.com tried to reach the director general of the department before Eid-ul-Fitr for comments for this story, but officials said he would be available after the Eid holidays.
An official fixed a date for a meeting with the director general, but when contacted for confirmation on that day, the official said he was busy in another meeting. The official also suggested the director general would not talk because he was new.
Later, bdnews24.com contacted Md Mojibor Rahman, a deputy director at the department.
“It can’t be. You must’ve misread it,” he said about the rates fixed by the department.
He also said the rates the reporter mentioned at the production level were the ultimate prices fixed by the department. “There have never been three layers.”
After the reporter read the reasonable profit margin table to Mojibor, he said, “I didn’t make it. And I’m no longer in that wing. I was never near these rules when they were made. I can’t answer questions about them.”
He declined to comment further, saying the current director general asked him not to talk to the media without his permission.
[Writing in English by Adil Mahmood and Osham-ul-Sufian Talukder]