Commerce Minister Tipu Munshi has directed edible oil companies to keep their millgate prices steady for at least 10 consecutive days before making any changes and halt the sale of unpackaged oil to help stabilize the market.
He also directed companies to market edible oil in 10-15 litre tins for corporate customers that buy in bulk, e.g., restaurants, and make 250-500 milliliter pouch packs available for buyers with lower purchasing power.
The minister conveyed the directions on Sunday while presiding over a meeting attended by edible oil millers, held to address local market shortages triggered by fluctuating global prices, and the resulting price hike.
Millers blamed the supply shortage and upward trend in prices on the intermediary businessmen who sell unpackaged oil, a number of officials at the meeting told The Business Standard.
It is worth noting here that the commerce ministry had outlawed the sale of unpackaged oil and the "Delivery Order" system a decade ago; however, due to a lack of oversight and implementation, unpackaged oil sales still meet three-fourths of the total market demand in Bangladesh.
The government and millers have no way of regulating the quality and price of unpackaged oil being sold by intermediary businessmen.
After the meeting, Tipu Munshi told journalists, "The companies have been instructed to stop the sale of unpackaged oil to prevent intermediaries from increasing the prices. Unpackaged oil presently accounts for around 70%-72% of the edible oils sales in Bangladesh's market.
"Edible oil sold in packages will have a maximum retail price printed on them, and the intermediaries will not be able to hike the price. Packaging will also allow the relevant authorities to ensure the quality of the oil."
When asked why the law prohibiting unpackaged oil sales has not yet been implemented, the minister said, "The industries ministry has started working on the matter. I am optimistic that in the next two years, companies will be selling 70% of the unpackaged oil in packaging."
According to a power-point presentation shown in the meeting, refining mills take at least 3-4 months to supply unpackaged edible oil, despite being mandated to do so in 15 days. Such delays destabilise the market.
The mills also issue more supply orders than they can handle, which in turn disrupts supply when the price goes up.
Moreover, when the price of unrefined edible oil goes up in the international market, the mills prioritise supply orders that have higher rates, thereby depriving those with lower rates.
Supply order owners are also reluctant to take delivery of their orders when the prices dip globally. According to the presentation, such malpractice negatively impacts the edible oil market in Bangladesh.
Meanwhile, the minister said, "In January last year, the price of per ton edible oil was $700 in the international market, but at one point it reached $1,190. The price has now dropped to around $740. But it takes around three months for the global price hike to hit the local market.
"Since we do not know how the global prices will fluctuate in the days ahead, we are not setting the price of edible oil at this time. A committee will evaluate the global rates every month and provide us with recommendations on edible oil prices. We will set local prices per these recommendations."
Tipu Munshi added, "The edible oil companies have to pay VAT on four levels – from import to marketing. They also pay advance tax and advance income tax. We have written to the National Bureau of Revenue (NBR), requesting them to impose the taxes on only one level, rather than four.
"We will send another letter to the NBR if necessary," he said.