Pvt sugar refiners rule the roost as public sector's presence far below par: Study
Thursday, 18 March 2010
FE Report
The sugar price escalation might have its roots in anti-competition practices, as the supply chain is almost under the grip of few private sector refiners with the public sector operators' presence in the market far below the par, a study has said.
In the study on 'Measuring the Economic Benefits of Competition,' it has been found that only four refiners control 80 per cent of the country's sugar market while the public sector mills can cater to only 10 to 15 per cent of the market demand.
The study, done by the Overseas Development Institute with DFID financing, has disclosed that the largest of the four refiners enjoys a market share of 46 per cent.
The state-owned sugar mills, run under Bangladesh Sugar and Food Industries Corporation (BSFIC), are far from competing with the private sector even after subsidising their sugar price due to poor sugarcane collection and an inefficient processing system.
However, despite the small market share, the BSFIC's performance easily comes to the notice during the month of Ramadan, when it releases much of its stocks to control the market, as the private sector players then seize the opportunity of high demand to raise prices.
"This is probably not the most efficient way for the government to prevent the overheating of prices," the study said, suggesting that the government could achieve the same outcome by importing white sugar and releasing in the market during Ramadan.
The study said the highly-subsidised public sector is there to save about five million people involved with production directly or indirectly, not for ensuring a fair competition in the market.
It has been found that the farmers of state-owned mill zone areas are encouraged not to sell sugarcane to the mills and they are also encouraged to switch over to another crop because of the low price of sugarcane.
Since the monopoly of the BSFIC and the Trading Corporation of Bangladesh (TCB) in sugar import was withdrawn in 2002, the study has found that the imported sugar has been able to capture only 10 per cent of the local market due to alleged anti-competition practices.
The competition law, however, does not cover many of the practices, the study said, citing an example that dumping of sugar does not strictly come under the purview of the competition law and it is dealt with under the World Trade Organisation, which provides a mechanism for the affected countries to challenge their trading partners, if any allegation of dumping arises, and takes necessary action, if necessary.
The sugar price escalation might have its roots in anti-competition practices, as the supply chain is almost under the grip of few private sector refiners with the public sector operators' presence in the market far below the par, a study has said.
In the study on 'Measuring the Economic Benefits of Competition,' it has been found that only four refiners control 80 per cent of the country's sugar market while the public sector mills can cater to only 10 to 15 per cent of the market demand.
The study, done by the Overseas Development Institute with DFID financing, has disclosed that the largest of the four refiners enjoys a market share of 46 per cent.
The state-owned sugar mills, run under Bangladesh Sugar and Food Industries Corporation (BSFIC), are far from competing with the private sector even after subsidising their sugar price due to poor sugarcane collection and an inefficient processing system.
However, despite the small market share, the BSFIC's performance easily comes to the notice during the month of Ramadan, when it releases much of its stocks to control the market, as the private sector players then seize the opportunity of high demand to raise prices.
"This is probably not the most efficient way for the government to prevent the overheating of prices," the study said, suggesting that the government could achieve the same outcome by importing white sugar and releasing in the market during Ramadan.
The study said the highly-subsidised public sector is there to save about five million people involved with production directly or indirectly, not for ensuring a fair competition in the market.
It has been found that the farmers of state-owned mill zone areas are encouraged not to sell sugarcane to the mills and they are also encouraged to switch over to another crop because of the low price of sugarcane.
Since the monopoly of the BSFIC and the Trading Corporation of Bangladesh (TCB) in sugar import was withdrawn in 2002, the study has found that the imported sugar has been able to capture only 10 per cent of the local market due to alleged anti-competition practices.
The competition law, however, does not cover many of the practices, the study said, citing an example that dumping of sugar does not strictly come under the purview of the competition law and it is dealt with under the World Trade Organisation, which provides a mechanism for the affected countries to challenge their trading partners, if any allegation of dumping arises, and takes necessary action, if necessary.