The 5 per cent regulatory duty imposed on the import of rapeseed may cause the price of mustard oil to shoot up and go beyond the purchasing power of consumers, millers said.
The hike will affect the consumers at a time when low and middle-income people are already struggling to afford soybean oil, whose price has gone up five times in the last five months, and other essential items.
While placing the budget for 2021-22 in parliament on June 3, Finance Minister AHM Mustafa Kamal imposed the regulatory duty on the import of rapeseed or mustard seed.
The import duty on oil cake, a feed that is produced during the extraction of mustard and sunflower oil, has been cut, a move that will hurt the domestic industry, said millers.
"If the duty is imposed on mustard seed in this way, everything will go out of reach of people given the way soybean oil prices are rising," said Biswajit Saha, director for corporate and regulatory affairs at City Group, one of the largest oil processors.
Every year, 2.5 lakh to 3 lakh tonnes of mustard seed are imported, and about 1 lakh tonne of oilseed is produced locally. One kilogramme of oil can be obtained from every 2.5 kg mustard seed. Currently, the annual demand for mustard oil stands at 1.5 lakh tonnes.
Because of the latest changes, mustard oil would be imported by paying duty, whereas oil cake can be brought without any duty.
"Doesn't it seem discriminatory?" Saha said, adding that the decision would destroy the domestic industries.
If the regulatory duty is levied on mustard imports, the duty would be about 15 per cent per kg of mustard oil since one kg oil is extracted from 2.5 kg of mustard seed, he said.
Nowadays, many people use mustard oil for cooking purposes as the price of soybean oil is skyrocketing.
The Bangladesh Vegetable Oil Refiners and Vanaspati Manufacturers Association hiked the price of branded canned soybean oil to Tk 153 per litre because of the rising prices in the international markets.
The new price, which is more than 42 per cent higher than a year ago, came into effect on May 2. The price of loose soybean oil was set at Tk 129 per litre, up from 43 per cent a year earlier.
"Because of the regulatory duty, the price of mustard oil will go up," said Saha.
The Bangladesh Oils Mills Association wrote a letter to the National Board of Revenue on Sunday, requesting it to withdraw the regulatory duty.
"The regulatory duty will increase the price of mustard oil produced locally. On the other hand, the reduction of the import duty on cake oil will lead to the destruction of the domestic industry."
No regulatory duty has been imposed on the import of sunflower seed and cotton seed. "This is discriminatory to any industry," the association said.
Therefore, in the interest of the domestic industry and keeping the price of mustard oil at a tolerable level, it is necessary to withdraw the proposed tax on the imported mustard seed, the millers said.
Millers buy mustard from local farmers and import rapeseeds to produce oil, cutting the reliance on the imported soybean and palm oil.
They also produce poultry and fish feed during the extraction of mustard oil. The domestic industry creates jobs for about 5,000 people, millers say.
Mohammad Jahangir Alam, an agriculture economist, said the proposed regulatory duty on mustard import might increase the price of mustard oil a bit.
"But it will not have much impact. Rather, it will encourage local mustard growers, and they will benefit somewhat," said the professor of the department of agribusiness and marketing at the Bangladesh Agricultural University.