Refiners seek more time to stop selling loose edible oil

Highlights: 

• Currently, about 70% of edible oil is marketed in loose format
• Mill owners sell palm oil at higher prices under the name of soybean
• BSTI says proper fortification of Vitamin A is not ensured in most loose oil
• As company names are not inscribed on oil drums, supplies often contain substandard oil
• They also manipulate prices

The government's decision to stop the sale of loose soybean oil after 31 May faces a setback as oil refiners, citing a lack of infrastructural preparation and expressing fear of further volatility in the market, want another 19 months to comply with it.

In letters to the commerce and industries ministries recently, the Bangladesh Vegetable Oil Refiners and Manufacturers Association said the oil refining companies could not install the necessary machinery and bring in experts required for packaging oil because of the Covid situation, according to sources at the ministries.

If refineries stop selling loose oil without completing necessary preparations amid the current turmoil in the international market, there could be a huge gap between supply and demand, which could ultimately make the local market more volatile, argued the association.

But after visiting several oil refining companies, inspection teams from the Bangladesh Standards and Testing Institution (BSTI) have said if the refineries show sincere intentions, they can implement the government directives within the stipulated time.

The government, in a bid to make sure cooking oil is sold at fixed prices, earlier this year decided to stop the sale of non-bottled or unpacked cooking oil by this year. The industries ministry also informed the refiners of the government decision and asked them to take necessary measures to implement it.

According to the directives of the industries ministry, sales of non-bottled palm oil must stop after 31 December this year.

But the vegetable oil refiners and manufacturers say the companies do not have enough preparation to completely stop selling loose oil before 2024.

Acknowledging that selling edible oil in unpacked format is unhealthy, the association, however, claims that City Group has imported machinery to market edible oil in packaged format instead of in drums. The company currently sells 45% of its cooking oil in bottled format. Besides, Globe Edible Oil Limited also is marketing 45% of its oil in bottles.

Asma Akhter Jahan, additional secretary (Quality Control and Business Support) to the industries ministry, told The Business Standard, "The refineries did not provide us with the required information by 25 April, even though they were asked to. We have asked for their information again. But, at the same time, we are analysing the information we have already received. When the analysis is over, we will decide whether we can actually stop selling loose soybean oil by 31 May."

Efforts are being made to stop the sales of non-bottled soybean oil and non-bottled palm oil under a technical assistance project entitled "Fortification of Edible Oil in Bangladesh (Phase-111)" of the Ministry of Industries. But, the initiative has been hanging in the balance for almost a decade because of alleged non-cooperation from the refiners. The existing law relating to the import of edible oil also prohibits the sale of non-bottled oil.

At present, about 70% of edible oil is marketed in loose format, mentioned industry insiders, adding that using this opportunity, mill owners sell palm oil at higher prices under the name of soybean.

According to the BSTI, proper fortification of Vitamin A is not ensured in most oil marketed in unpacked format. And, because companies' names are not inscribed on the drums of oil, companies that supply substandard oil cannot be held accountable. Moreover, even if any company manipulates the prices of loose oil, they cannot be identified. 

Meanwhile, a study by the Bangladesh Food Safety Authority (BFSA) has found that most of the drums used for edible oil are not hygienic, and not even food-graded. As a result, refined oils become contaminated after being taken into the drums. This is very harmful to public health.

Kazi Salahuddin Ahmed, senior manager at S Alam Group, told TBS that although it is possible to completely cease the marketing of unpacked oil for in-home usage consumer packs, there is no substitute for drums in marketing oil for industrial use. Otherwise, the cost will increase a lot.

"Bottling causes a value addition of Tk25 per litre, whereas it is only Tk3 in the case of using drums," he explained. 

"For this, the use of the company seal should be made mandatory, instead of banning the use of drums. Then, any company can be held accountable in case they supply substandard oil to the market."

Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said, "Sales of loose oil must be stopped fast. There is no need to increase the cost by using plastic bottles, it is possible to reduce the cost by using poly packs like in different countries."

He also observed that if all the oil is sold in packets, the scope of creating instability in the market by illegally hiking prices would also be reduced.