Edible oil price hike: Manipulation merry-go-round

The supply order, crucial for dealership of edible oils, has turned out to be a key tool being used to inflate the prices at the country's biggest trade hub in Chattogram.

The refiners at Khatunganj issue the supply order (SO) for specific dealers. The document makes the dealers eligible to buy certain volumes of edible oil from refiners.

But instead of using the document to purchase the cooking oil, the dealers simply sell it to a third party. In fact, the document is sold multiple times before it is actually used to pick up the oil from the refiner.

Meanwhile, the buying and selling of the document adds up to the prices of non-bottled cooking oils.

Business insiders said this manipulation has been possible because the edible oil refiners do not mention the price on the SOs.

The refiners are violating a government rule by making this omission, said local business owners.

Asked about this, Biswajit Saha, director for corporate and regulatory affairs at City Group, said no oil refiner mentions the price on SOs. "We don't have a problem mentioning the price if the other millers do it."

Market insiders said it has been an open secret that whenever there is a strain on the global supply chain of edible oils, some individuals make a lot of money by working the system.

As edible oil prices are rising globally due to Russia's invasion of Ukraine, the SOs now change hands at least five times.

The intermediaries make a profit of Tk 250 to Tk 500 per maund [37.32kg] out of thin air, wholesalers said.

The government introduced the SOs in 2011 to stop market manipulation and to stabilise the market. But it has not worked, traders say.

"Essential commodities like edible oils, sugar, wheat and onion are sold in Khatunganj through the SOs," said a wholesaler.

Regarding the illegal practice, City Group's Biswajit Saha said, "We sell SOs to our designated dealers, and they collect the products from the mill before the end of the 15-day period. If they sell it to someone, it is illegal. It is not possible for us to catch it if it changes hands.

"The administration should check if these SOs change hands illegally."

A wholesaler said, "Traders used to buy the SO slip of palm oil from a refiner for Tk 5,400 per maund in mid-February. But by the end of February, the slip went for Tk 5,900, which means the price of palm oil rose by Tk 500 per maund before it even reached the market from the refiner. Loose edible oil could have cost Tk 13 less a kg if there were no intermediaries."

Shahedul Alam, proprietor of RM Traders, a listed dealer, told The Daily Star, "Some people often try to make extra profit by buying the SOs. They make a profit of two to three taka per maund and often make a loss. However, this time the situation is different due to reasons that include the Ukraine-Russia war and the rising prices in the international market."

SM Nazar Hossain, president of Chattogram chapter of Consumers' Association Bangladesh (CAB), said, "To control the market, mill owners must mention product prices on SOs, and dealers and mill owners should not sell the SOs.

"The administration should regularly monitor these matters and bring those crooked traders to book. It will not be possible to control the price of essential products otherwise."

Additional Deputy Magistrate Sumani Akther told The Daily Star, "Our magistrates have started conducting drives in the market to stop those who make extra profit through SO trade of various consumer goods."

Akhter added that the administration will look into the fact that the prices are not mentioned in the SOs.

The government fixed the retail price of loose palm oil at Tk 135 a kg, and soyabean oil at Tk 180. They were sold at Taka 140 and 180 in the retail markets of Chattagram yesterday.