Sugar turning bitter!

High prices in the global market, difficulties in opening letters of credit (LCs) due to the ongoing dollar crunch, and high tariffs on imports have already created a supply crunch of sugar in the local market – a situation that traders and stakeholders say could worsen in the upcoming Ramadan.

Amid this situation, the Bangladesh Sugar Refiners Association on Thursday increased the prices of sugar by Tk5 per kilogram. Loose refined sugar will now cost Tk107 per kg and packaged refined sugar Tk112.

The new prices will come into effect on 1 February.

The decision to hike the price was taken after consulting the Bangladesh Trade and Tariff Commission and the Ministry of Commerce, the association said in a press release on Thursday.

This is the third time the government has hiked sugar prices in the last six months. However, traders have often disregarded the government rates and sold the commodity at higher prices.

Earlier on 17 November 2022, the price of refined sugar was increased by Tk13 per kg to Tk102 per kg for loose sugar and Tk107 per kg for packaged ones. 

But loose and packaged sugar are currently selling for Tk125-130 per kg in the market, which is still much higher than the prices fixed on Thursday.

Md Sahid, the owner of Sahid General Store in the capital's Segunabagicha, told The Business Standard (TBS), "We have to sell sugar at Tk125 per kg because we are buying it at a higher price."

According to wholesale traders, a supply crunch is looming as Ramadan surged the demand for sugar amid import curbs. It takes at least 15-20 days to get the supply of sugar from the mills.

Secretary General of Sugar Refiners Association Golam Rahman told TBS, "We are desperately moving from one bank to another for opening LCs in the past few months. Supply will not increase unless imports of sugar normalise."

"The government is fixing the price only for the refiners but not for the wholesalers, which is causing the fluctuation in market prices. The government is responsible for this, not us," Golam Rahman added.

According to the commerce ministry, Bangladesh's annual demand for sugar is 18-20 lakh tonnes, whereas the country locally produces only 30,000 tonnes.

The import of sugar during the July-December period of 2022 decreased by about 2.08 lakh tonnes compared to the same period in 2021, according to ministry sources.

However, the demand for sugar is 1.5 lakh tonnes per month, which doubles in Ramadan. The country's processed food industry accounts for about 50% of the normal demand for sugar. That is why the production cost of the processed food industry has increased.

Mohammad Jalal Uddin, president of the Bangladesh Bread, Biscuit-O-Confectionary Prostutkarak Samity, told TBS, "Due to the increase in the prices of various raw materials including sugar and flour, the production cost has tripled from Tk5 to Tk15. Besides, around 70% of the sugar used in the industry is used in the bakery and biscuit industry."

Commerce Minister Tipu Munshi on Thursday told the media, "The price of sugar has increased in the international market. If the price is not fixed in line with the global market, the volatility in the market will not decrease."

Besides, the Bangladesh Bank has given instructions to four government banks for opening LCs on a priority basis for the import of daily commodities, he said.

High import duty is another factor at work behind the rise in sugar prices. At present, around 61% duty is levied on imports of various types of raw sugar. Due to the increase in dollar value and the price of sugar in the world market, the amount of duty has also increased, forcing importers to pay Tk,31-32,000 per ton of sugar, which was Tk22-23,000 earlier.

Despite repeated recommendations by the commerce ministry, the National Board of Revenue (NBR) has not yet taken any initiative to reduce the duty on sugar imports.

Bangladesh imports the most amount of sugar from India after Brazil despite the South American country's good global production. 

However, the Indian sugar import is currently halted and traders said it takes 45-60 days to import sugar from Brazil to the market.

Local production has no impact on market

Local production of sugar has hit rock bottom due to the closure of six sugar mills. Production has now fallen below 30,000 tonnes, which was 1.28 lakh tonnes in FY 2013-14.

Commerce Minister Tipu Munshi said the sugar market is completely dependent on imports, and the local production is so low that it cannot have any impact on the market.

According to the Bangladesh Sugar and Food Industries Corporation (BSFIC), local sugar production peaked at 1.28 lakh tonnes in the fiscal year 2013-14 as 15 sugar mills were in production at the time.

The minimum sugar production was recorded at 24,000 tonnes in fiscal 2021-22. A total of nine government sugar mills are currently producing sugar. The government stopped production at six sugar mills in 2020 due to heavy losses.

Anisul Azam, managing director of North Bengal Sugar Mills, told TBS, "It costs Tk150 to produce per kg sugar by threshing sugarcane in the mills. However, if we calculate the debt that the mills have, the cost will be around Tk300 per kg."