Dhaka, Bangladesh (BBN) – The Bangladesh government as well as the central bank has taken various measures to cool the overheated rise market immediately, officials said.
Under the moves, the central bank of Bangladesh has already asked commercial banks to open letter of credit (LC) for importing rice with zero-margin on the basis of bank-client relationship.
Rice importers are now allowed to open LC for importing rice without advance deposit in this connection.
Currently, the banks are allowed to impose the LC margin on the basis of bank-client relationship ranging between zero and 100 per cent.
The Bangladesh Bank (BB)’s latest move came against the backdrop of unstable situation on the rice market recently due to flood and continuous rainfall.
Besides, the millers and rice traders will have to repay their loans in each alternative 30 days in line with the existing rules to ensure smooth supply of the essential in the market.
The millers and traders are now taking advantage of availing loans in the form of cash credit against pledge of rice.
On the other hand, the government has decided to bring the import duty on rice at 10 per cent from the existing level of 28 per cent aiming to rein in the soaring price of the staple.
The move has been taken amid falling stock of the food grain in the government storage and to facilitate imports by the private sector.
The National Board of Revenue (NBR) is set to issue a statutory regulatory order (SRO) any time reducing the duty which was first imposed on May 2015.
The duty was then imposed to protect the interest of farmers following fall in rice prices in domestic market due to excessive imports.
Currently, there is 25 per cent customs duty and three per cent regulatory duty on import of rice.
Commerce minister Tofail Ahmed said the price situation would soon be normal due to the decision of lowering the import duty as well as the government’s planned import of rice.
The price of essential started to rise following decline of the government rice stock, loss of boro production in hoar areas from early flash-floods and fall of import by private sector due to high duty, market operators explained.
According to the state-owned Trading Corporation of Bangladesh, price of coarse varieties of rice rose by 46.88 per cent in last one year.
Coarse rice like Shorna was sold at BDT 46-48 a kg in local market on Tuesday against BDT 30-34 a kg a year ago.
Prices of fine and medium varieties of rice like Najir, Miniket and Paijam also increased by up to 20.65 per cent during the period under review.
According to the Centre for Policy Dialogue estimation, the flash-floods in haor areas caused a loss of 1.6 million tonnes of rice production which was about 8.5 per cent of the total boro production.
Declining public stock is also a major reason behind rising rice price in the recent months.
The government’s rice stock stood at only 0.18 million tonnes on June 18 against 0.60 million a year ago, according to official figures.
The government’s boro rice procurement from the local market also witnesses slow progress as the food ministry managed to collect only 38,161 toones of rice since May 2 this year against the procurement target of 0.8 million tonnes of rice by August.
Rice import also dropped by more than 50 per cent in the current fiscal year 2016-2017 compared with that of the last FY 2015-2016.
According to the ministry data, private sector businesses imported only 0.12 million tonnes of rice in the current fiscal year up to June 18 while they imported 0.26 million tonnes of rice in the last fiscal year.
Meanwhile, the US Department of Agriculture and Foreign Agricultural Services (FAS) in a report said in Fiscal Year 2016-17, rice production in Bangladesh is likely to fall by 34.51 million tonnes due to reduced planting of its summer rice and increased winter rice production.