The government needs to reexamine the effectiveness of the "Essential Commodities Control Order (1981) and explore the need to enact a law styled as "Supply and Regulation of Essential Commodities Ordinance (2007)" to provide a statutory basis to the government's targeted emergency measures for keeping prices of certain "essential commodities" within the means of common citizens.

(ii) Strengthen Market Intelligence. The government may create a new agency styled as the Department of Market Surveillance (DMS) under the existing legal framework of the now extinct Department of Prices and Marketing Intelligence (DPMI) for prudential supervision of the daily essential commodities markets. The proposed DMS will work in close collaboration with the DAM, Department of Agricultural Extension (DAE), Directorate of Food (DAF) including Food Planning and Monitoring unit (FPMU), and TCB. The price monitoring Unit of the TCB may be merged with proposed DMS. The DMS will particularly be responsible to collect data on global production and price situations as well as the projection of different essential commodities. The DMS will provide suggestions to the TCB regarding import and export policies based on its assessment of the local and global market.

The DAM should be provided with adequate manpower and financial resources to convert it to a more effective organisation. The DAM should be given the responsibility to estimate the region-wise demand and supply capacity with the help of other agencies and this information may be disseminated through the proposed DMS.

(iii) Rationalise Import Duties of Essential Commodities. If possible, government should introduce zero tariffs for selected essential commodities (currently zero import tariff has been provided for rice and wheat) particularly for the ones for which import price is high (e.g. Lentil).

The ad-valorem tariff depends on the import prices. For specific tariffs to be in place the government will need to replace the existing ad-valorem tariff structure by specific tariffs for essential commodities. The CPD analysis of National Board of Revenue (NBR) data reveals that NBR should analyse the import data for essential commodities for the last few years and recommend a product-specific flat rate per tonnage replacing the existing tariff structure. It will give the importers protection against the highly fluctuating international price of essential commodities on the one hand, and eliminate incentives for misinvoicing on the part of the importers as regards import tax evasion thereby ensuring revenue generation interest of the government.

Rationalisation of high Supplementary Duty is essential for certain products (taking in cognisance local production prospect), particularly for whole cream milk powder. However, the government should negotiate with packaging and distributors of WCMP (e.g. Nestle, Sanwara group) before implementing this removal/reduction so that the benefit originating from such move is accrued to the consumers in the form of reduction in the existing market price.

The importers have urged the government to provide a declaration in the budget speech regarding the possibility of revision of the duty structure of essential commodities subject to overall national demand and supply situation of the country and in view of any fluctuations in international prices. This kind of declaration will give the importers a higher degree of business predictability.

(iv) Increase Market Agents at Import Level. The government should encourage the commercial banks to facilitate formation of groups of small scale importers (in terms of capital) to import essential commodities so that they may take the benefit of economies of scale (bulk import). This will help new players to enter the market and with the growing number of importers/traders, the popular perception and speculation about syndication may be removed. However, existence of such groups will give rise to some technical queries such as What would be the legal identity of such groups? Will they place purchase orders using one of the member's business name/trade licenses or will they need to register themselves as different entities and use the information pertaining to that entity for banking and tax purposes? Will they be equally liable for the bank loans or will they be liable only for their proportion of the loan? Government has to think through these issues and amend the rules and regulations, if necessary.

The government should monitor international prices of imported essential products on a regular basis through its institutional mechanisms and disseminate the information among concerned authorities and in the market to prevent price fixing and supply manipulation through syndication.

(v) Reduce the Production Cost of Agricultural Commodities. Power distribution to the agricultural sector should be increased with a view to reduce the use of diesel for irrigation through load management. In this regard government must increase the local electricity generation capacity and may consider a wider application of solar power to generate electricity in rural areas with the help of NGOs. The government should also explore the opportunity to import from the neighbouring countries and to establish a SAARC regional gridline in the medium term.

The government should consider providing more subsidies on the rate of power usage in agricultural sector which is currently Tk 1.89 per KWh. Importantly; electricity supply for irrigation purposes has to be increased on a priority basis.

The government needs to provide subsidy directly to the farmers' on petroleum usage for irrigation. Modalities for this subsidy should be developed with strict monitoring mechanism (so that only genuine farmers may be benefited) and tight border security to prevent smuggling. To this end, either issuance of Entitlement Card or use of the proposed voter/National ID card may be considered.

As the government and private entrepreneurs are currently meeting only 12.50 per cent of the total demand for seeds, initiatives should be taken to increase supply of quality seed by private sector and NGOs. Towards this, special support for production of breeders' seed and supplying those seed at subsidized rate to NGOs and private sector companies for production of truthful level seed is necessary. This will reduce their production cost and increase seed supply and thereby production.

(vi) Reduce Financial Charges and Exchange Rate for Trade in Essential Commodities. In case of letter of credit (L/C), banks usually determine the margin on the basis of bank-client relationship a higher margin could raise the price of foodgrains and emergency necessary items. In case of emergency daily necessary items, L/C margins should be fixed as low as possible.

Bangladesh Bank may take initiative to encourage all commercial banks to lower the interest rate against loan for importing/ domestically procuring essential commodities (e.g. LTR, LIM, CC Pledge, CC hypo). This may be fixed for a certain period of time and then may be reviewed again.

In Bangladesh, the USD-BDT exchange rate buy-sell difference for importers and exporters is currently 2.23 per cent, which is 1.30 per cent in India, 0.61 per cent in Pakistan and 1.47 per cent in Sri Lanka. This difference should be close to 1.00 percent.