Govt mulls duty cuts as private rice import fails

Highlights:

• Rice import duty is coming down from 25% to 15%
• About half of the allotted importers did not open LCs
• The government has cancelled the allotment of those who did not open LCs after receiving allotments
• Importers have no interest due to high rice prices in India
• Government foodgrains stocks are very low
• Distribution target of foodgrains under social security programmes has been reduced

There is no momentum in rice import at the government level. Due to high prices in the Indian market, there is a lack of interest among private importers too. As a result, the government target of keeping the local market under control with imported rice has completely failed.

In this situation, the government is working to further reduce the tariff on rice imports, according to sources in the food ministry.

At present, 25% import duty is levied on the import of parboiled and sundried (Atap) rice. The food ministry has recommended a further 10% reduction in the duty so that it becomes possible to control the high price in the local market by importing rice quickly at a low cost.

Earlier, import duty was reduced from 62.50% to 25% when imports of rice were allowed at the private level.

At a meeting recently chaired by Food Minister Sadhan Chandra Majumder, it was decided to reduce the tariff on rice imports.

The food secretary, agriculture secretary, a representative from the commerce ministry, and a member of the National Board of Revenue (NBR) attended the meeting at the food ministry.  

At the meeting, Sadhan Chandra provided detailed information on rice imports, stating that 320 private importers had been allowed to import 1016,500 tonnes of rice.

But even after the extension of the LC opening deadline twice, many of them did not open LCs until February 15. Again, many opened LCs but did not import rice.

The food minister said, "Both the number of LCs opened and the quantity of imports is disappointing. That is why the allotment of those who did not open LCs at the scheduled time has been cancelled. This allocation is now being redistributed to those who have already opened LCs."

At present, the price of rice is high in the Indian market. According to the daily foodgrain situation update of the ministry of food, the cost of per kg parboiled rice imported from India is around Tk50.

Therefore, importers are not able to sell rice at a lower price by importing it from India because, depending on the type of rice, they have to pay an import duty of Tk8-9 per kg.

So far LCs have been opened for only 6.16 lakh tonnes of rice import through private importers, which are a little over half of the total allocation. And only 1.52 lakh tonnes of rice have arrived in the country.

Food Secretary Mosammat Nazmanara Khanum said market prices could not be controlled as the amount of privately imported rice had not been as expected.

"Although prices came down a little at the beginning of the decision on imports, prices of paddy and rice are going up again," she said.

Meanwhile, Senior Secretary at the agriculture ministry Md Mesbahul Islam said traders were taking advantage of the alarming decline in government stocks and could attempt to increase prices further.

"At this time, all measures have to be taken to increase public stocks. If necessary, the supply of rice in the market should be increased by further reducing import duty at the private level," he added.

"This year, both the area of land for Boro and the target for cultivation have been increased. Farmers have been provided with incentives to cultivate hybrid paddy on about two lakh hectares of land."

He was hopeful that this time there would be a good yield, adding that, therefore, import would need to be limited to ensure that farmers got good prices.

"Imports cannot continue after April."

The meeting, meanwhile, emphasised the need to reduce tariffs on parboiled and sundried rice imports as well as increase supply in the private sector as public stocks were not sufficient.

According to Syed Golam Kibria, NBR Member (Customs Policy), "Import duty is imposed in the interest of farmers. But paying attention to the food security of all people is needed. The NBR is ready to provide all kinds of assistance regarding the decisions taken at this meeting."

Noting that there was no alternative to increasing government reserves to control the market, he said, "We should take initiatives to import rice from other countries as a backup instead of depending on a single country."

 Allocation for TR and Kabikha decreased due to low public stocks

The government has a target of distributing foodgrains under various social security programmes, including TR, Kabikha and OMS, every year. But this time the food ministry has not been able to continue different programmes even after reducing that target.

In fiscal 2020-21, the amount was reduced from the original demand of 31.36 lakh tonnes to 24.55 lakh tonnes – 18.64 lakh tonnes of rice and 5.90 lakh tonnes of wheat.

A source in the food ministry said the government had failed to meet the procurement target in the last Boro and Aman seasons as paddy prices were high in the market, which resulted in the low stocks of foodgrains.

A total of 14.01 lakh tonnes of foodgrains – 10.69 lakh tonnes of rice and 3.32 lakh tonnes of wheat – have been distributed till February 18.

By next June, 7.95 lakh tonnes of rice and 2.58 lakh tonnes of wheat will have to be distributed. At the same time, at the end of the financial year, in June 2021, the stock should be at least 10 lakh tonnes according to the policy.

So the total demand is 15.95 lakh tonnes of rice and 4.58 lakh tonnes of wheat. According to the food ministry, the total government stocks of foodgrains till March 1 is 6.34 lakh tonnes – 5.29 tonnes of rice and 1.05 lakh tonnes of wheat.

As a result, the social programmes through which foodgrains are distributed are at risk. In other words, the government is under a lot of pressure to procure foodgrains.

Food Secretary Mosammat Nazmanara Khanum said, "There is not enough stockpiling due to the slow arrival of rice from India. Not enough OMSs are being distributed to control market prices. Only a limited number of OMS activities are being conducted in the metropolitan and district cities."

Ghulam Rahman, president of the Consumers Association of Bangladesh (CAB), told The Business Standard that the OMS programme needed to be strengthened when rice prices registered a rise in the market.

"This reduces the pressure on low-income people. But if the government cannot play a role in this, there will be no limit to the sufferings of the people," he added.