True beneficiaries of lower rice duty rate

Dhaka,  Mon,  25 September 2017
Published : 09 Jul 2017, 20:49:09

True beneficiaries of lower rice duty rate

The lack of market monitoring and farsightedness on the part of the ministry concerned is solely responsible for rice price reaching a record high in domestic market when  international prices of the item have been stable at low level for quite some time, writes Shamsul Huq Zahid
The government has recently lowered the rate of duty on rice import against the backdrop of soaring prices of the main staple. The rate now stands at 10 per cent from the previous 25 per cent. The authorities have also waived the regulatory duty of 3.0 per cent. 

Prior to the reduction of duty for the private import of rice, the government had inked deal with Vietnam to import rice and a few more deals are likely to be struck with some other rice exporting countries. 

It took almost no time for the private traders to start the import of rice from neighbouring India. Rice started reaching the country's land ports within days after the government reduced the import duty on the item. The rate of arrival of the main staple from India is expected to intensify soon in the next few weeks. 

But the price of rice at the retail level is not coming down to the desired level despite arrival of imported rice. This development has given rise to worries in the official circle. That is why it had held a meeting with the leading rice traders in Dhaka early last week seeking to know the reasons for rice price sticking to the previous levels. The officials concerned reportedly expressed a tough stance on any move to raise the rice price through manipulative activities. 

The government suspects that some unscrupulous rice traders are responsible for the recent surge in rice prices. A vernacular daily has even published report showing how much money --an estimated Tk 20 billion --these rice traders have made through their price manipulation. 

Interestingly, the newspaper published a few estimates concerning the volume of rice the manipulators sold and the excess amount they fetched per kilogram of rice. But it did not quote any source while furnishing the estimates. 

There is no denying that all these were guesstimates and not at all authentic. But the possibility of manipulation with rice prices cannot be ruled out, for traders here always try to cash in on every opportunity to maximise their profits, unduly. 

But why blame traders alone? The truth is that the government has prepared the ground for traders to indulge in price manipulative activities.

The Ministry of Food watched its rice stock dwindling to a dangerous level and did not take any initiative to replenish it. When the government silos were supposed to maintain a food stock of at least 1.0 million tonnes, the actual stock of the same had come down below 200,000 tonnes in May last. The rice import by the private sector had declined substantially due to hike in duty in the budget for the last financial year. In such a situation rice prices were rising steadily in the past few months. But the Ministry of Food took no action. The flash flood and blast disease that had caused substantial damage to Boro crop in the Haor and some other areas made the situation worse and the prices of rice started going up unabatedly. 

This time around the government woke up to the ground realities and the Ministry of Food urgently swung into action. A delegation led by the food minister visited Vietnam and signed memorandum of understanding on rice import. 

This government-to-government deal on rice import did not help much in cooling off the over-heated domestic rice market. Though the government was initially reluctant to reduce duty on rice import by the private sector, in the face of growing pressure from within and outside the duty was reduced to a substantial extent. The businesses were also pressing the government to waive duty on rice import. 

One cannot but help admit the fact that a section of businesses in this part of the world are more interested to maximise their profits in any manner, fair or foul. When the rice price soared to a record level in 2012, the government waived duty on rice and the private traders imported rice in large quantities and built up large stocks in 2013 and 2014. But large import coupled with record domestic production resulted in substantial decline in the prices of the main staple. Growers found it difficult to retrieve their cost of production. Private traders also lowered import of rice during the years 2015 and 2016 when the government again raised the duty on rice. 

However, with the rice stocks both at private and public sectors declining, the situation turned quite favourable for prices of the item in the domestic market to shoot up. Now duty cut has created another opportunity to make undue profit.

The lack of market monitoring and farsightedness on the part of the ministry concerned is solely responsible for rice price reaching a record high in domestic markets when international prices of the item have been stable at low level for quite some time. 

Allegations have it that an unscrupulous section in the Ministry of Food does consciously play into the hands of the private sector market manipulators. It is hard to dismiss the allegations for some obvious reasons. One particular reason is the relevant ministry's failure to arrange import of rice before its stock reaching a critically low level. The government's inability in the matters of market intervention did obviously help the market manipulators.
Editor : A.H.M Moazzem Hossain
Published by the Editor for International Publications Limited from Tropicana Tower (4th floor), 45, Topkhana Road, GPO Box : 2526 Dhaka- 1000 and printed by him from City Publishing House Ltd., 1 RK Mission Road, Dhaka-1000.
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