BB move to discourage rice import

Bangladesh Bank (BB) yesterday tightened measures to discourage rice imports with a view to ensuring fair prices for growers.

The central bank directed banks to fix a margin for opening letters of credit (LC) for rice import based on banker-client or transactional relations instead of providing zero-margin benefit.

This means businesses would have to bear a portion of import costs while opening the LCs. "In no way LCs can be opened for rice import at zero margin," said the BB in a circular.

The central bank issued the directive after the government reimposed 28 percent duty on rice import early this month to protect growers, who were making sales well below their production cost amidst surging imports and increasing domestic production this year.

Some farmers, their rights organisations and economists said the decision had come too late to benefit small growers.

They said the reimposition of import duty would rather benefit middlemen, millers and businesses which made imports before the duty hiked from 2 percent.

The government reduced the duty in two phases in June and August last year to increase supply and curb a price spike owing to crop losses for floods in the north, which accounts for over half of the production of boro rice.

Traders also cashed in on falling stock of food grains in the public warehouses and hiked prices.

The BB said it asked banks in June last year to open LCs for rice import without taking any advance payment with a view to control the price of the essential product on the local market.

The banks were instructed to follow the directive till December 31, 2017. In its latest circular, the BB said farmers have had good harvests this year owing to favorable weather.

"Under the circumstance, the government has taken different initiatives to ensure fair prices for growers and to give a boost to the production of the staple food," said BB.

The central bank has also extended the loan disbursement tenure of current credit (hypothecation and pledge) for mill owners and rice traders.

This means they have to adjust their current credit with banks within 45 days instead of the previous 30 days.