PM acted, let the market act

On Tuesday, the National Board of Revenue (NBR) withdrew the Value Added Tax (VAT) on edible oil at production and retail stages. Through a statutory regulatory order (SRO), the revenue board lifted the taxes at the insistence of Prime Minister Sheikh Hasina. Sensing the minor impact of the withdrawal, PM at the cabinet meeting on Tuesday also asked the NBR to lift import level VAT from the key cooking ingredient. The initiatives from the government deserve the highest applause from all walks of life, as the government did not bother to earn from different tiers of VAT applicable on edible oil. To soothe the consumers from the rising commodity market caused largely for the Ukraine war, and global supply disruption, buyers are expected to feel a lesser burden than they have in recent times. However, the effectiveness of duty waiver, or withdrawal rests on the business community's role—refiners, importers, wholesalers, and retailers. City Group Director Biswajit Saha told The Business Post if 15 per cent VAT was withdrawn at the import stage, oil prices would fall by Tk 20 per litre. We want to believe that market will act as per the estimation of Biswajit Saha.

Commerce Minister Tipu Munshi on Monday said that the government had decided to withdraw VAT on edible oil by 15 per cent at all stages. "We have no control over reducing prices in the international market. It depends on Brazil, as we import 90 per cent of edible oil from there," the minister also said. He further said that there was no crisis in the domestic market at present, and the country
has enough food stocks to meet the demand of the upcoming Ramadan. A five-litre soybean oil bottle was sold at Tk 820 in Dhaka's retail markets on Monday, up from Tk 795 set by the government. Besides, a one-litre bottle was sold at Tk 165-170 and non-bottled palm oil at Tk 155-158. Non-bottled soybean oil was not available in
the market.

It is to be noted the soaring prices of commodities keep eroding the purchasing power of consumers. Each item in the kitchen market is spiraling, and going beyond the financial capacity of buyers. Supply disruption, cost escalation in importing countries, and a monopolistic attitude of a section of greedy traders made the market for essential items beyond the reach of common people. Key food items like edible oil, wheat, and beef hit an all-time high. Ahead of Ramadan, to fix the volatility in the market, serious attention from the government is needed, and ethical business practice is essential for all types
of businesspersons.

After the tax withdrawal, the government has no fiscal tools to cool the market other than launching administrative measures against hoarders and profit-mongering businesspeople. We don't expect a situation where police forces raid and arrest dishonest traders. Doing business and making profits is a natural process, which only contributes to the economy. Making people hostage by taking tax benefits from the government, on the other hand, is a crime.

The whole world is going through a very tough time with the invasion of Ukraine by Russia and slowing economic growth due to the Covid-19 pandemic. The consequence is --intolerable price pressures on consumers globally and locally. Since Bangladesh's economy is largely dependent on foreign sources for edible oil, LNG, wheat, and industrial raw materials, inflation in sourcing countries will impact local prices. The double whammy of price pressures sometimes becomes a triple whammy for hapless consumers for lack of business ethics from a section of unscrupulous traders.

The government has acted promptly. Prime Minister Sheikh Hasina instantly instructed on containing essentials’ prices through regulatory and fiscal measures.

We hope the commodity market will now act rationally.