Exempt VAT to cool off cooking oil market: FBCCI

In the face of the record edible oil rates, the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) has requested the government to exempt value-added tax (VAT) on cooking oil for next three months.

With a 15% VAT slapped on edible oil, now the government gets Tk20-Tk22 as VAT per litre of non-refined cooking oil, ultimately putting a squeeze on the consumers, according to the apex trade organisation.

At a meeting in Dhaka on Monday, the FBCCI said the government will have to take the decision promptly to stabilise the spiralling oil rates that deal a blow to Bangladesh's inflation fight. Otherwise, the government will have to import on its own from an already tight international market made even tighter by the Russia-Ukraine war.

"Our neighbouring India has already adjusted the retail rates by reducing tariffs on cooking oil. But we did not apply the policy," FBCCI President Md Jashim Uddin told the meeting attended by top oil refiners and wholesalers.

Referring to a changed business landscape globally due to the pandemic, he said, "Shipping costs have skyrocketed and the commodity supply chain has collapsed."

Urging the cooking oil traders and importers to strengthen their market monitoring, he called for action against delinquent traders. He said the FBCCI too would monitor the market.

"How does the Tk143 per litre of soybean oil turn to Tk173 in just a couple of days? You, the market player, must have the answer and be careful. Otherwise, you all will be in trouble," the leader of the apex trade organisation told oil importers and traders.

After raising edible oil prices at least five times in the past one year, oil importers and refiners on 1 March sought the government to hike another Tk12 a litre. The government's "no" subsequently met with a supply crunch and volatile rates as high as Tk190 for the past one week. One and two-litre oil bottles apparently vanished from the market in Dhaka.

Market manipulation?

The FBCCI president at the meeting inquired about local oil stock, and said that the data suggest no supply crunch until next Ramadan in April.

"Then why does the current crisis prevail," he questioned the traders.

"The current stock was imported three months ago, which is not supposed to reflect the recent hike in the international market," he built on the argument.

In reply, Md Taslim Shahriar, assistant general manager at Meghna Group, shifted the blame to the authorities, saying the government did not allow them the Tk12 hike.

"Though the current supply was bought months ago, the retail rates are supposed to be Tk199 per litre as per the then purchase rates," he told the meeting.

Bangladesh Edible Oil Limited Head of Finance Mohd Dabirul Islam said both import and supply are fine. Current market crisis could have been averted if the government allowed the Tk12 hike.

Biswajit Saha, general manager of City Group, too said there is no supply crisis in the local market, but the wholesalers are hoarding cooking oil to manipulate the market.

Kazi Salahuddin Ahmed, senior manager of SA Group, told the meeting that China has adopted an aggressive soybean seed buying to boost its stock. India too looks for a better soybean reserve as Russia's attack on Ukraine jeopardised Delhi's sunflower oil import from Kyiv – causing oil to soar further in the international market.

Finger pointed at refiners

Haji Mohammad Golam Mawla, president of the association of edible-oil wholesalers, told the meeting mismanagement by importers and millers, and a failure to supply oil to wholesalers on time are affecting the retail rates.

"Our trucks sit idle at mill gates for days as the importers and refiners are not supplying oil on time. We have to pay the trucks the waiting charge, and have to adjust it in retail," he claimed.

The wholesaler said, "Various government agencies are now behaving like they used to do during the caretaker governments. They are mounting irrational pressure on us in the name of raids."

"Instead of pressure, the focus should be on fixing the supply as we are committed to selling oil at a fair price," he said, adding, "But you cannot pressurise me when you cannot fix the supply."

Meanwhile, Dhaka's Moulvibazar business leader Bashir Uddin said there are instances that their trucks had to wait 15 days at mill gates to get the supply, leading to a Tk30,000 additional cost.

According to the commerce ministry, the annual demand of cooking oil is 20 lakh tonnes, while the demand in the month of Ramadan is up to 3 lakh tonnes. Against the annual oil demand, importers have brought in 5 lakh tonnes of non-refined soybean oil, 24 lakh tonnes of soybean seeds with an estimated production of 4 lakh tonnes of non-refined oil and 11 lakh tonnes of palm olein so far.