Govt starts monitoring as commodity imports fall

---

Naim-Ul-Karim
The government has started making a close watch over the imports of major commodities as leading importers baulk at opening fresh letter of credits (L/Cs), amid the substantial fall in prices in the international market, a top official said Tuesday.
The propensity of importers to increasingly cancel L/Cs for the imports of essential commodities, the rate of which shot up sharply in recent weeks, has prompted the commerce ministry to review the situation, Commerce Secretary Feroz Ahmed said.
"We're extremely concerned over the falling trend in opening of L/Cs for import of consumer goods," he said.
Mr Ahmed noted that the ministry along with the Bangladesh Bank and other agencies would step up import monitoring to find the mismatch between demand and supply that might push up retail prices.
Bankers are also closely watching the situation, saying if importers continue to put imports on hold for a prolonged period, it could lead to piling up of non-performing loans.
Aminur Rahman, chief executive officer of Janata Bank Ltd, said if importers fail to repay loans, the banking sector would land in trouble. "But it's too early to predict."
The commerce ministry Tuesday sat with leading importers, wholesalers and senior bankers as part of the monitoring.
"Importers informed us they already incurred huge losses due to the price drop. They're now shaky about opening new L/Cs," Mr. Ahmed told the FE after the meeting.
Central bank officials said the rate of cancellation of L/Cs against import of essential items, particularly rice, wheat and edible oil, has been relatively high in recent weeks. A number of L/Cs for scrap vessels was also cancelled because of the drastic drop in the prices of metal items including steel in the global market.
The L/Cs for edible oil worth US$26.21 million were cancelled during the first quarter of the current fiscal. Such cancellation was worth only $2.42 million during the corresponding period of the previous fiscal, according to the central bank figures.
The BB data show that L/Cs for rice worth US$39.63 million were cancelled during July-September period of the current fiscal (2008-09) as against $22.44 million in the corresponding period of the last fiscal.
A BB official said recently not a single L/C was opened to import rice during the first 23 days of the current month due to seasonal impact as well as the falling trend in prices of cereals in the global market.
The government might have scrapped L/Cs for wheat, a BB official had earlier told the FE adding that at least 0.10 million tonnes of wheat, which were scheduled to reach the country, were yet to come.
Apart from this, L/Cs for scrap vessels worth $3.06 million were cancelled during the period under review. The cancellation of LCs for scrap vessels was worth $0.09 million during the corresponding period of the pervious fiscal.
The commerce secretary said they will consider ways to devise means to make the situation normal though it is not still a threat to the supply situation.