TCB plans commercial sales of soap, tea, salt, flour, edible oil to reduce subsidies

Infographics: TBS

The state-run Trading Corporation of Bangladesh (TCB) is planning a major overhaul of its business model to reduce the annual subsidy burden of Tk2,500-3,500 crore.

Alongside subsidised essentials, it plans to sell profitable products such as soap, detergent, tea, salt, flour, edible oil and spices to both family cardholders and the general public.

The agency has also drawn up a package of reforms covering fund management, including purchasing goods with its own funds, opening letters of credit with private banks offering lower interest rates, regularly adjusting product prices, and fully digitising its operations.

The TCB estimates that the measures could initially save around Tk940 crore a year and reduce its subsidy requirement by nearly 50%. The agency aims to eliminate the subsidy altogether by 2030, which is why it has dubbed the plan "Mission Zero".

TCB Chairman Brigadier General Mohammad Foyshol Azad presented the plan to the commerce minister on 14 July. The ministry has given in-principle approval, officials said.

The chairman said their review has found that the subsidy can be eliminated within 4-5 years by changing their business model, fund management, and product management.

The TCB survey also found that consumers want affordable soap, detergent, salt, spices and tea from the agency, he said. "That is why we have taken this initiative."

Tk28cr profit in four months

TCB officials said the agency began commercially selling soap, detergent and salt on a pilot basis in April, earning Tk28 crore in profit between April and July. It sold Lux and Meril soaps, Wheel detergent powder, and Chaka and Wheel soaps below market prices.

TCB Chairman Foyshol said dealers previously deposited sales proceeds with deputy commissioners' (DC) offices, which took up to 45 days to transfer the funds to TCB. Under the new system, dealers deposit directly into TCB, cutting the transfer time to seven days.

"This has reduced TCB's reliance on bank loans to finance commodity purchases," he said. "TCB hasn't taken any bank loans to buy lentils and sugar over the past two months."

TCB is also awaiting Tk600 crore in subsidy funds, which would further reduce its borrowing needs and interest costs, he said.

The agency now supplies dealers directly from its own warehouses instead of DC facilities, cutting warehousing and handling costs by around Tk60 crore. Faster payments to suppliers have also helped secure lower procurement prices.

How TCB sells below market prices

Asked how the TCB can sell products below market prices, the chairman said it buys directly from manufacturers, bypassing multiple layers of the conventional distribution chain.

"Under the usual marketing system, manufacturers pay commissions to at least three levels – distributors, dealers and retailers – and these costs are reflected in the final price," he said, adding that the TCB does not have these layers.

As a result, the TCB can sell Lux and Meril soap for Tk45 instead of Tk65, Wheel detergent powder for Tk65 per kg instead of Tk80, and salt for Tk36 instead of Tk40-42, he said.

How TCB plans to save Tk940cr

According to TCB estimates, the agency expects to earn around Tk450 crore a year from its new product business. Timely government subsidies would save another Tk350 crore.

It also expects to save Tk100 crore by having dealers deposit sales proceeds directly into TCB's account, Tk20 crore by supplying goods directly from warehouses to dealers, and another Tk20 crore through exemption from turnover tax.

Where most of the subsidy goes

According to TCB data, 73% of its subsidy goes to selling goods below procurement costs, while bank loan interest accounts for 18.19% and operating expenses 8.81%. Edible oil requires the highest subsidy, followed by lentils, sugar, chickpeas and dates.

TCB bought goods worth Tk6,851 crore but sold them for Tk3,629 crore in FY23, requiring Tk3,222 crore in subsidy. The subsidy rose to Tk3,417 crore in FY24 before falling to Tk2,717 crore in FY25, and Tk2,514 crore in FY26.

TCB's interest expense rose from Tk309 crore in FY23 to Tk533 crore in FY24, before declining to Tk495 crore in FY25 and Tk457 crore in FY26.

Other reforms

TCB plans to cut warehouse rents and unforeseen expenses, improve its supply chain, expand its own warehouse network, open LCs through private banks at 11.5% interest instead of higher-cost state banks, and fully automate operations. It also plans to adjust subsidised product prices every three months and review dealer commissions.

TCB officials said subsidies could eventually approach zero through POS systems, modern logistics, better warehouse management, a wider product range and full digitisation. The agency is also in talks with Bangla QR to enable faster, more secure transactions.

TCB's current sales

TCB currently sells five products at subsidised prices: soybean oil, lentils, sugar, chickpeas and dates. For FY27, it plans to procure 22 crore litres of soybean oil, 2.2 lakh tonnes of lentils, 1.1 lakh tonnes of sugar, 14,000 tonnes of chickpeas and 4,400 tonnes of dates. The products are distributed through 6,438 dealers to 72.54 lakh family cardholders.

Sayema Haque Bidisha, economics professor at Dhaka University, said the initiative should be carefully assessed to ensure TCB stays focused on its core responsibility. "Commercial activities should be managed separately from TCB's primary operations."

She said safeguards were needed to prevent people from buying TCB products for resale at a profit. "A proper monitoring mechanism should be developed."

AHM Shafiquzzaman, president of the Consumers Association of Bangladesh (CAB), said the TCB should focus on other ways to lower its subsidy burden while strengthening its social protection role.

He said the government's commercial ventures had already failed in Bangladesh. "TCB's proposed business model therefore needs careful scrutiny to determine whether it will benefit consumers or simply create opportunities for certain groups."