Local businesses have hiked sugar prices, speculating a possible move by the tax authority of imposing VAT on imports to better protect the locally produced alternative.
The prices of sugar rose 11 percent to Tk 44-Tk 46 a kilogram now, from Tk 39-Tk 42 two weeks ago, according to the Trading Corporation of Bangladesh.
"Reports on the possibility of imposing a 15 percent VAT on imports affected the market," said Abul Hashem, vice president of Bangladesh Sugar Merchants Association.
The National Board of Revenue imposed 20 percent regulatory duty on raw and refined sugar imports in August.
Revenue officials said the NBR is likely to impose a 15 percent VAT on imported raw and refined sugar to better cushion the state mills against cheaper international alternatives.
Bangladesh Sugar and Food Industries Corporation (BSFIC), which runs 15 state sugar mills, has been seeking duty protection to trim losses and clear its stockpile that currently stands at 115,000 tonnes.
The NBR is also likely to increase minimum import prices, also known as tariff value, for raw and refined sugar, which are now $320 and $400 per tonne respectively.
Wholesale prices of sugar rose by nearly Tk 2 per kg over the past month, and prices also went up globally, Hashem said.
Sugar prices, which had been on the downturn in the July-September quarter of 2015, regained in October, according to the World Bank's commodities prices data.
World sugar prices rose to $0.32 a kg in November from $0.31 a year earlier.
"All, including millers and sellers, are rationing sales expecting that the government would impose VAT on imports. Private millers hiked prices nearly a week ago," Hashem said.
However, state-run mills are still selling sugar at Tk 37 a kg, he said.
Bishwajit Saha, general manager of City Group of Industries that runs the biggest private sector sugar refinery, denied having increased sugar prices.
Many dealers, who have bought sugar at Tk 1,300 per maund, are yet to take delivery, he said.
"It appears they are waiting for the government to impose duty, to exploit higher prices," Saha said, adding that City's daily delivery from the mill gates has recently halved from the usual 3,000 tonnes.
BSFIC Chairman AKM Delwer Hussain said they earlier urged the government to increase duty on imports to help boost sales of locally produced sugar.
"We will be able to sell our sugar if imported alternatives become costlier. It will allow the state mills to reduce losses. It will also help cut the state's subsidy," he said.
"None can make the sugar market volatile as we have enough stocks."
Hussain said most of the sugar mills under the BSFIC have started crushing sugarcane this season, and have been in production since October 30. "So, we will have enough sugar," he said.
Bangladesh consumes nearly 15 lakh tonnes of sugar a year, 90 percent of which are locally-refined imports, according to industry estimates.