Edible oil prices: Just a little relief

Amid public outcry over the spiralling prices of edible oils, the government yesterday partially removed VAT on refined palm and soybean oil, but it is not likely to greatly ease the consumers' burden.

Fifteen percent VAT at the production stage and five percent at the retail level will be removed with immediate effect till June 30, said the National Board of Revenue in a notification.

However, customers are likely to get only marginal benefit as the 15 percent VAT on imports of crude palm and soybean oil remains.

Top officials of two major cooking oil importers and processors of the country said without the removal of VAT at import stage to go with waivers at production and retail levels, consumers already paying highest-ever prices for edible oil would pay just Tk 1.5-Tk 3 less per litre.

Currently, consumers pay Tk 26-Tk 30 VAT per litre of bottled soybean oil at the government-fixed price of Tk 168 per litre, refiners said.

Moreover, the decision of Argentina -- Bangladesh's main source of crude soybean oil -- to halt registration of export sales of soybean meal and oil yesterday could erode consumers' gains from the government's step.

"This will help consumers save to some extent … they will get benefit once refiners reduce prices and mention maximum retail prices on bottles following the VAT waiver," said Ghulam Rahman, president of Consumers Association of Bangladesh (CAB).

Responding to reporters at a press briefing yesterday, Commerce Minister Tipu Munshi said the government would cut VAT at the import stage to 10 per cent from 15 per cent to enable consumers better afford the cooking oil.

The VAT waiver comes after public outcry after the key cooking ingredient became scarce in the domestic market amid slow release by refiners, stocking by a section of traders to make hefty profits in the wake of surging prices in the international market following Russia's invasion of Ukraine last month.

Yesterday, a five-litre container of soybean oil was selling for as high as Tk 820 at some retail outlets in Dhaka, up from government-determined prices of Tk 795 for the same.

Bangladesh annually consumes roughly 20 lakh tonnes of edible oil and has to import 90 percent of the key essential from countries like Argentina, Brazil, Indonesia and Malaysia.

Taslim Shahriar, senior assistant general manager of Mehgna Group of Industries (MGI), said keeping the 15 percent VAT at the import level means the burden would be passed on to the consumers as refiners would not be able to get rebate of the VAT paid at import stage.

"Now, VAT that we will pay at import will become cost as we will not be able to claim rebate at production stage as per the rule," he said.

As a result, VAT burden on consumers will decline by up to Tk 1.5 per litre, he said.

An official of City Group, another leading importer and processor, said the price drop could be as high as Tk 3 per litre following the withdrawal of indirect tax at production and trading stage.

CAB President Ghulam said consumers may get some relief for future imports if the government waived VAT at the import stage.

CONCERNS FOLLOWING ARGENTINA'S MOVE

Much of the gain in VAT removal is likely to be eaten by the soaring prices of edible oil in the global market for various factors.

The decision of Argentina, the top global exporter of both soybean meal and oil, will likely roil the global soy market, which has seen prices spike on Russia's invasion of Ukraine, reports Reuters.

Refiners in Bangladesh said they would have to pay increased attention to buy palm oil from the international market following the export curb by Argentina.

"We will also buy more soybeans for crushing to extract oils," Taslim Shahriar said.

"We are importing to ensure supply in the domestic market but prices are higher," he added.

Biswajit Saha, director of corporate affairs of City Group, said, "We are trying to import from various sources to ensure supply."