'Added production cost has become a burden for businesses'

Faria Yasmin started her career in the multinational company Nestlé Bangladesh after completing her BBA and MBA programmes at the Institute of Business Administration (IBA) of Dhaka University. Later she worked at Marico Bangladesh, Rahimafrooz, Bangladesh Edible Oil Ltd and Reckitt Benckiser.

After that, she joined ACI Foods and was quickly promoted to business director of the company. In her long career there, she has been in charge of managing a total of six businesses under three companies of ACI.

Faria Yasmin spoke with The Business Standard's Senior Correspondent Abbas Uddin Noyon and Staff Correspondent Shawkat Ali about the latest developments in commodity markets, the Russia-Ukraine war, load shedding and the impact of the gas crisis on businesses and consumers.

The prices of various products in the world market have increased as the import sources have shrunk due to the impact of the Russia-Ukraine war. Along with the dollar crisis, freight charge hike and importing of raw materials at twice the price, the shortage of gas and electricity have pushed the production costs to go up.

Everyone is blaming the price increase of products but, not taking these situations into account, whereas the companies are fighting to survive in the current reality sacrificing profit margin, said Faria Yasmin.

There is no import of wheat from Russia except at the government level. A small shipment has arrived from Ukraine. India's wheat which was at the lowest price in the world market – around Tk24,000 per tonne – now costs around Tk 51,000. But India is not exporting wheat now and some nominal volume of wheat is coming from Canada, she said.

Wheat milling is also disrupted due to 6-7 hours of load shedding in the factories. Overall production has dropped by over 20%. There is no gas supply and using alternative fuel increases the fuel cost by four times due to the fuel oil price hike. 

"Even if we choose to keep the production halted, we have to pay the salaries of all the employees. In other words, the overhead production cost is also increasing," said the ACI official.

"What have we done in this situation? Commodity prices have increased by around 28%. But, there are increasing concerns over how long the companies will be able to operate adjusting the double price of raw materials and added production cost," she said.

Faria Yasmin said companies have no choice but to sacrifice profit margins. If the situation does not improve, companies will eventually lose interest and employment will be affected.

Due to the price hike of products and the effect of inflation, the consumption pattern of consumers is changing.

Consumption of food products has reduced by around 4.7%. People have not of course stopped eating rice and pulses, but reduced consumption. There is also a decrease in the consumption of luxury items and snacks, Faria said.

This business leader also talked about what steps companies can take when both businesses and consumers are under pressure.

She said the government should have an integrated policy, which is more important than the business people's strategies. We are processing and supplying products to the customers which makes us a part of the supply chain. Work needs to be done on how other parts of the supply chain should function.  

"We do not cultivate paddy, the farmers do, and a group collects from there. We buy from them and mill it. Now before pointing fingers at us, our sourcing price should be taken into account.

At the same time, production has dropped due to a few natural causes.

In this situation, there should be a clear message from the policymakers or the economists, because, without supply, it is difficult to control the market and make decisions," she said, adding that If there is a production shortfall, it is important to decide collectively what steps can be taken.

"If a company incur losses due to a price cap imposed by the government on a product then the company will naturally not do business. Traders will sustain losses until a point after which they will back off. To avoid such a situation everyone must work together and decide on the policy," she said.

"The whole world is going through this crisis and it is not a time for a blame game," Faria said.

Regarding the steps ACI has taken to deal with this situation, Faria Yasmin said, ACI made an exceptional move when many companies laid off manpower during Covid-19.

On the contrary, ACI gave increments to employees. ACI does not want any pressure on employment due to the economic crisis, which many can imagine will deal a big blow to the industries as a whole.

But no one can predict which direction the global situation is heading. The UK and the USA are all going through a crisis.

"Prices of goods have increased in our country for logical reasons, but thankfully no one had to starve. But it is difficult for the companies to sustain without increasing the prices of products.

"We have taken initiatives to save energy and reduce unnecessary expenses to tackle the current situation," she added.