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All supply chain players behind the crisis

Major edible oil importers sued
Rokon Mahmud
14 May 2022 00:00:00 | Update: 14 May 2022 00:57:16
All supply chain players behind the crisis

Despite adequate imports, Bangladesh started suffering from a cooking oil supply shortage right before the Eid-ul-Fitr. Now, raids and investigations conducted by government agencies are establishing the fact that everyone involved in the supply chain, including importers, wholesalers, dealers and retailers, played significant roles in creating the crisis.

The Directorate of National Consumer Rights Protection (DNCRP) and different law enforcement agencies have recovered a huge amount of oil hoarded in warehouses and depots of retail and wholesale traders.

Over the past 13 days, more than 738 tonnes of illegally preserved soybean and palm oils were seized — which is almost enough to meet the country’s cooking oil demand for two days.

According to Bangladesh Competition Commission (BCC), the judicial body responsible for encouraging competition in the market, importers and refinery companies also played bigger roles in triggering the crisis.

It said these entities violated the Competition Act provisions when they hoarded the oil and created the supply crisis and pushed up the prices. BCC has already started cases against eight importer companies for manipulating the production and supply of edible oil.

Right before the Eid, soybean and palm oils had vanished from the domestic market across the country. The crisis continued after Eid. Despite that, edible oil prices were raised from Tk 38 to Tk 42 per litre on May 5, but this move failed to end the supply crisis.

Even now, traders are selling loose soybean oil at Tk 208-210 per litre instead of the fixed rate of Tk 180. Bottled oils are also yet to reach the shops and kitchen markets.

All these are happening although the amount of oil that has already been imported into the country, according to customs officials, is higher than the overall demand for a month.

The raids

Starting after the Eid until Thursday, the DNCRP, law enforcers and local administrations in various districts seized some 738 tonnes of cooking oil after raiding many warehouses and depots in retail markets.

Even on Friday, DNCRP teams seized at least 6,500 litres of oil hoarded by shop owners and dealers during raids in Manikganj, Faridpur, Cumilla and Chattagram districts.

DNCRP also fined the individuals Tk 4.1 lakh in total. They also fined two shops in Cumilla and Chattagram Tk 10,000 each for selling oil at higher prices. All seized oil was later sold at the right price by the DNCRP teams.

On Thursday, a Rapid Action Battalion mobile court seized some 236 tonnes of hoarded soybean and palm oil from three companies in Khulna. It also fined them Tk 1.6 lakh in total. DNCRP drives in 36 districts also recovered 206 tonnes of edible oil.

Earlier on Wednesday, 58 teams of DNCRP during raids across the country seized 181 tonnes of oil, which they sold at the fixed prices later. In the previous 10 days, 115 tonnes were also recovered, said DNCRP.

Mill owners allege that larger amounts of edible oil than these are still being hoarded by retail and wholesale traders, making the supply shortage lingering.

Cases against 8 companies

The BCC recently started independently investigating the reasons behind the edible oil crisis. Based on its findings, the commission on Wednesday sued eight importer companies and asked them to attend the hearings on May 18 and 19.

The eight companies are City Edible Oil Limited (Teer), Bangladesh Edible Oil Limited (Rupchanda), Meghna and United Edible Oils Refinery Limited (Fresh), Bashundhara Oil Refinery Mill (Bashundhara), Shabnam Vegetable Oil Industries Limited (Pusti), S Alam Super Edible Oil Company Limited (S Alam), Prime Edible Oil Limited (Prime), and Globe Edible Oil Limited (Royal Chef).

BCC Chairman Mofizul Islam told The Business Post that the commission can file cases suo moto against anyone if they violate the Competition Act.

“Our probe found proof of such allegations against these companies. We have asked them to attend the hearings. Necessary steps will be taken after the hearings,” he said.

The cases against these eight companies have been started in line with the Section 15(2)(b), which states that “any agreement, the practice or decision of any person or association who are engaged in identical or similar trade of goods or services shall be deemed to have adverse affect on competition in goods or services market if [it] limits or controls production, supply, markets, technical development, investment or provision of services” and in response, BCC will be able to take legal action against them.

The demand

According to Malaysian Palm Oil Council data, in Bangladesh, the daily demand for edible oil is 427 tonnes — which means the total demand over the past 12 days was 51,000 tonnes.

On average, the country’s annual demand for edible oil is 1.5 million tonnes, including 840,000 tonnes of soybean oil and 700,000 tonnes of palm oil.

Bangladesh’s edible oil imports rose by 77,000 tonnes year-on-year in the first nine months of FY2021-22, but instead of easy access to this kitchen essential, domestic consumers have been grappling with severe supply shortages and higher rates.

A recent Commerce Ministry report, citing Bangladesh Bank data, showed that the refiners opened LCs (letters of credit) for 1.475 million tonnes of edible oil during the July-March period of this fiscal, and imported 1.23 million tonnes.

The country had imported 1.153 million tonnes of edible oil against LCs opened for 1.453 million tonnes in the same period of FY2020-21. In total, Bangladesh imported 2.1 million tonnes of palm and soybean oil in 2021, according to media reports.