Tariff commission finds refiners' role in sugar market volatility

Refiners are behind the volatility in local sugar market, according to a report of the Bangladesh Trade and Tariff Commission, which found the millers' role in manipulating local market supply and price of the sweetener.

They use various tactics, such as cutting supply during global price hikes, delaying the release of goods against supply orders and taking higher orders than their capacity to make extra profits, reads the commission's report sent to the commerce ministry.

The report appeared at a time when the commerce ministry has decided to allow refiners to increase sugar price by a whopping Tk16 per kg, the biggest jump at one go so far, which will instantly raise the administered rate to Tk125 per kg, though market price is already higher.

A kg of non-packaged sugar is now selling at Tk130-140 in retail against the government-set price of Tk104. Furthermore, the essential commodity is unavailable in many shops and its packaged form is completely out of the market.

"We have received complaints about these issues [sugar market irregularities]. We are working to fix these issues as soon as possible," Commerce Senior Secretary Tapan Kanti Ghosh told The Business Standard.

The Tariff Commission report said no government-set prices – be it for mill-gate, wholesale or retail – are followed.

Moreover, sugar millers manipulate the supply of sugar to control its price. They make unusual delays in releasing sugar stocks, taking as much as 4 months which should take only 15 days. This creates an artificial shortage in the market, shooting the price up.

The irregularities are a clear violation of the Essential Commodities Marketing and Distributor Appointment Order 2011, the report noted.

Sugar millers denied the allegations and said the Tariff Commission report is not based on the truth. "Sugar supply has never been reduced," Taslim Shahriar, senior assistant general manager of Meghna Group of Industries, told TBS.

When contacted, Sugar Refiners Association Secretary General Golam Rahman declined to comment.

Currently, five mills – City Group of Industries, Meghna Sugar Refiners, S Alam Refined Sugar Industries, Abdul Monem Sugar and Deshbandhu Sugar Mills – are refining and marketing sugar. Their annual production capacity amounts to 39 lakh tonnes, according to the commerce ministry.

The demand for sugar in the market is 20-22 lakh tonnes per year, while 97% is imported and 3% is locally produced. Besides, 5% of sugar is sold in packets and the rest in bulk form.

The Tariff Commission, in its report, said the country lacks competition in sugar in the market due to the limited number of mills, recommending that Bangladesh Competition Commission should act upon.

It also called for reducing import duties on sugar and increasing the number of refining mills.

 Ministry to allow Tk16 hike per kg

The Ministry of Commerce, in a letter on Wednesday, asked the Bangladesh Sugar Refiners Association to increase the prices of non-packaged and packaged refined sugar by Tk16 per kg.

"With this increase, the retail price of non-packaged refined sugar will stand at Tk120 per kg from Tk104 and packaged sugar at Tk125 per kg from Tk109," Commerce Senior Secretary Tapan Kanti Ghosh told TBS.

"We will recommend a further reduction in the duty. A letter will be sent to the National Board of Revenue to this end," he added.

Last month, the prices of a kg of non-packaged and packaged sugar were increased to Tk104 and Tk109 respectively.

Commerce ministry officials said if refiners do not agree with the recommended prices, they will discuss it at a meeting on Thursday.

Taslim Shahriar, senior AGM of Meghna Group, told TBS that the recommended prices are yet to come into effect. "We will decide after Thursday's meeting."  The refiners' body earlier suggested the Tariff Commission set sugar prices at Tk125 a kg for packaged and Tk135 for packaged form.