More VAT waiver on cooking oil as Argentina halts export

After cutting value-added tax (TAX) on production and retail stages, the government now moves to slashing soybean import tariff to provide a respite to consumers, according to Commerce Minister Tipu Munshi.

The minister said Monday that the current 15% VAT on soybean oil import could be reduced to 5%, and a circular to this regard might be issued soon.

However, the government measures to rein in spiralling cooking oil prices faced a bump as top soybean oil and soy product exporter Argentina halted the export Monday to contain its domestic market.  

While briefing journalists on government measures to calm soaring commodity prices ahead of Ramadan, Tipu Munshi said the decision to waive VAT on oil import came from the prime minister.  

In a separate development Monday, Prime Minister Sheikh Hasina at the regular cabinet meeting directed the revenue board to reduce import tariffs on essential commodities including edible oil and sugar to keep the prices at a tolerable level.

"We think this move will have a direct impact on the market," Cabinet Secretary Khandker Anwarul Islam briefed the reporters after emerging from the meeting.

Earlier on Sunday, an inter-ministerial meeting came up with different decisions to rein in the spiralling prices of essential commodities. The meeting decided to form a taskforce so that unscrupulous traders could not grasp any undue opportunity by increasing the prices of daily essentials.

Cooking oil prices have been soaring in the international market for the last two months. Despite the government fixed rate of Tk168, soybean oil is now at Tk180-Tk190 per tire at retail.

After raising oil prices at least five times in the past one year, the refiners recently proposed another Tk12 hike per litre to the government. The government's disapproval of the proposal met with a local market supply crunch and volatility.

Cooking oils are facing a perfect storm, with as much as 60% of sunflower oil exports from the Black Sea region being delayed in the current marketing year because of Russia's invasion of Ukraine.

The tight international supply has been forcing countries to adopt protective measures over essential consumer items. On 9 March, top palm oil exporter Indonesia imposed export curb, while the latest soy oil export postponement by Argentina sends another chilling message to the domestic market.     

Local cooking oil market may endure another blow

Md Taslim Shahriar, assistant general manager (accounts) of oil refiner Meghna Group, said Argentina's export cessation will certainly deal a mighty blow to the international as well as the domestic market.     

"The crisis might turn as nasty as there would not be enough soy oil supply even after paying the exporter in advance," he feared.   

Commerce Minister Tipu Munshi Monday too said that he can neither predict about the international market nor have anything to tackle it.

The minister said the government is tailoring the countermeasures based on the current international oil rates. "We will have to dial up the efforts if we have to import at a higher rate," he noted.    

Md Shafiul Ather Taslim, Director (finance and operation) of another oil refiner TK group, said Argentina's decision would take one-two months to have a remarkable impact on the international market.    

Argentina's average monthly exports stood at 300,000 tonnes of soy oil in 2021, according to shipping agency NABSA.

According to a recent Bloomberg report, combined palm oil shipments from Southeast Asia will not surpass volumes in 2020 until the third quarter, as world soybean oil shipments will likely decline in 2021-22 because of higher demand in exporting countries.

Taslim said there might be a massive cooking oil crisis if Argentine soy oil does not enter the market even for a brief period.

Enough stock to blunt rallying essentials?

Bangladesh with the current commodity stocks is able to maintain the regular market supply till the early-May, according to the commerce ministry. But the market may turn unstable to some extent if consumers get panicked and opt for panic buying.   

"There are apparent supply crunches since some are hoarding the items. But we have enough in stock as the TCB [Trading Corporation of Bangladesh] is ready to provide 1 crore citizens with subsidised daily essentials," said Commerce Minister Tipu Munshi.       

He assured of a stable commodity market, and said VAT waiver on imports may even help reduce current rates.    

"But our concerns are over the war since we also need to think about wheat alongside oil. Bangladesh imports wheat mainly from Russia and Ukraine," noted Tipu Munshi.     

Argentina's export halt to make protein intake costlier   

Argentina's soymeal export halt will make cattle and poultry feed production costlier, according to producers, which will ultimately result in pricier meat, fish and eggs.           

Bangladesh has 18-20 lakh tonnes of soymeal per year. The country imports 75%-80% of it while the remaining 20%-25% is imported from Argentina, Brazil, USA, India and Paraguay.   

"Any soymeal supply crunch in the international market will be a massive blow for us," Ihtesham B Shahjahan, president of the Feed Industries Association Bangladesh, told The Business Standard.   

The oil producers and refiners import soy seeds and crush locally to manufacture soy oil. They imported 24 lakh tonnes of soy seeds last year, and produced 4 lakh tonnes of oil. The feed producers purchased the soy oil bi-product.   

"The crunch will push up the rates no matter if we import soymeal from international market or source it from the local refiners. Pricier feed will raise fish and meat prices," he added.   

Soymeal amounts to 25%-35% of the poultry and cattle feed raw materials.