Edible oil refiners cut output, caused artificial crisis

Edible oil refineries are creating an artificial crisis in the market through a number of irregularities, including scaling down supply, not delivering even after taking orders, keeping refinery units shut and arbitrarily labelling higher prices than those set by the government.

A five-member supervisory team of the Directorate of National Consumer Rights Protection has found the irregularities after visiting six refineries in the country around mid-March and recommended legal measures against them.

The probe report, filed with the commerce ministry on 3 April, found that the supply of edible oil in December 2021 was 14,579 tonnes whereas it was 20,487 tonnes in January this year. The supply started to drop from February when it was 17,164 tonnes and until 19 March the supply volume was only 6,310 tonnes.

The team filed a probe report with the commerce ministry on 3 April, stating that S Alam Super Edible Company kept their refinery units shut and reduced supply significantly in January and February despite having a stock of crude oil. The company also intentionally delays delivering products for days after taking orders.  

Besides, the loose soybean oil drums, supplied by S Alam, are not even labelled whether they are containing soybean or palm oil, the probe body found.

Other refineries –  City Edible Oil Ltd, Bangladesh Edible Oil Ltd, Shabnam Vegetable Oil Industries Ltd, Meghna and United Edible Oils Refinery Limited and Bashundhara Oil Refinery Mill – also reduced supply in March compared to the previous month, creating a supply crunch of edible oil at the retail market. 

Infographic: TBS

The directorate recommended regular monitoring by a joint team at the mill gates to prevent the refineries from repeating similar practices in future.

Not only the refineries, but also dealers and wholesalers were involved in the irregularities, including stockpiling of edible oil and price hikes, the probe body found, and also recommended legal action against them.

During a briefing at the Secretariat on Monday, Commerce Minister Tipu Munshi said action would be taken against any refineries found involved in stockpiling and creating artificial crises.

Asked about the directorate's probe findings, Kazi Salahuddin Ahmed, senior general manager of S Alam Group, told The Business Standard that only the soybean production line was shut for two or three days for maintenance. But the Palm Oil refinery line was operational.

"Even the inspection team understood the matter," he added.

Asked about bottling with a higher price than the stipulated price, he said, "There was a mistake. There was no problem with 1, 2 and 3 liter bottles. Incorrect price tags were mistakenly used in the 5 liter bottle, which we quickly fixed later."

The edible oil refineries are seeking permission to increase soybean oil price by Tk12 per litre, citing the context of rising prices in the international market. However, the refineries chose to raise the price without a nod from the government – from Tk168 to Tk180-190.

With the supply going down steadily, the retail market is in serious shortage of oil causing consumers to suffer.

During a meeting held by the directorate on 9 March, wholesalers and dealers complained they get deliveries 15 to 30 days after they place orders. They also pointed out that the mills are charging more than the stipulated price.

The edible oil millers present there denied the allegations, claiming they were supplying oil at the price fixed by the government in a timely manner as soon as the supply orders were received.

The probe body, during their visit to the City Edible Oil Limited, found expired supply orders.

However, City Group Director Biswajit Saha claimed there were no issues in their refineries.

TK Group Director (Finance and Operations) Md Shafiul Ather Taslim said that the supply in March was only 795 tonnes less.

He also said that the problem with supply orders has now been resolved.

To control the edible oil market, the government slashed 5% VAT at the consumer level, 15% at the production level and 10% at the import stage. Soon after that the price of bottled soybean oil was reduced from Tk168 to Tk160.

Meanwhile, Meghna Edible Oil Refinery Limited wrote to the commerce ministry seeking an upward revision of the price.

In its letter it stated that the latest price set by the government was $1,400 for soybean and $1,295 for palm oil whereas they imported palm oil at a price of $1,600.

Unless the price is readjusted, the company is looking at incurring huge losses, the letter added.