Refiners' plea for oil price hike needs strict scrutiny

FE Team | Published: November 17, 2023 18:11:44

The refiners and millers of edible oils seem to have developed the habit of clamouring for oil price hike whatever the market situation. Notably, the cooking oil refiners are learnt to have sent a letter to the Bangladesh Trade and Tarff Commission (BTTC) requesting a raise in the price of their merchandise on the grounds that due to appreciation of the US dollar, they have to pay more in Taka to purchase the greenback for import purpose. Oddly enough, the edible oil prices in the global market are lately at their lowest in the last six months. It may be recalled at this point that the National Board of Revenue (NBR) earlier in March last year granted the oil refiners a one-year tax break by 10 percentage points (from then-existing 15 per cent VAT to 5.0 per cent) on cooking oils to give some respite to the public reeling from runaway price hike of essential commodities.
Though later the prices of edible oils more than doubled in May 2022 (compared to 2020's price), the prices subsequently fell by more than 40 per cent in April this year. Meanwhile, the one-year VAT waiver that the oil refiners had been enjoying came to an end. Even soSo, they again made a plea for hiking oil prices, despite their fall in global market. Against this backdrop, the government in June last year instructed refiners to lower both retail and wholesale prices of oil (soybean and palm oil). Even so, it was later found that the market in most cases did not reflect the downward adjustment of the prices so made by the government. Now they have again come up with their demand for oil price hike afresh. Interestingly, the refiners in their early July's request to the government for a raise in the oil prices also placed similar arguments of appreciating US dollar against Taka, increased bank interest rates following the government's new monetary policy for FY 2023-24 and so on to justify their demand despite a persistently bearish edible oil market globally.
So, before considering the pressures from oil merchants to upwardly adjust cooking oil price, a plea that calls for scrutiny to see if it is based on facts, needs to be attended. The government will be required also to keep in mind the public's endless plight, thanks to the stubbornly volatile essential commodity market. In this context, the Bangladesh Trade and Tariff Commission (BTTB), to which the Bangladesh Vegetable Oil Refiners and Vanaspati Manufacturers Association, in short Association, did, reportedly, appealed for an oil price hike, would do well to examine the merit of their request in the light of cooking oil's price in the international market and the current trend of the foreign currency market. In this connection, in view of the historic decline in edible oil prices in the world market, experts including the consumers' right protection bodies, not only questioned the Association's request for a price review, but also advised a reduction in the prices (of cooking oils). In a similar vein, they, however, recommended a temporary removal of duties on cooking oils, sugar and other imported edibles. But from the past experience of similar duty waivers, questions remain about the efficacy of such a measure, if adopted. In that case, the authorities concerned would be well-advised to weigh up the options before taking a fresh review of edible oil prices.