Refiners raise concerns over govt intervention

Local edible oil refiners have voiced concerns over the government's intervention in fixation of the cooking oil prices for the domestic market.
They also alleged that unilateral decisions, undue delays, and a lack of transparency were undermining the legal framework and fueling speculation in the domestic edible oil market.
The Bangladesh Vegetable Oil Refiners and Banaspati Manufacturers Association (BVORBMA) stated that while it had consistently followed the provisions of the Essential Commodities Marketing and Distributor Appointment Order, 2011, the government's intervention often drifted away from the established rules, creating an environment of indecision for edible oil mill owners and discouraging crucial investment.
In a recent letter to the Ministry of Commerce (MoC), the BVORBMA claimed that the association was mandated to reasonably and fairly adjust edible oil prices from time to time.
It wrote the letter following announcement of the hike in prices of soybean and palm oil by the refiners on October 13 last.
However, Commerce Adviser Sk Bashir Uddin on October 14 last said the government had not approved any increase in edible-oil prices.
It is a matter of great regret that the government, despite lacking the sole power for unilateral price fixation under the Order of 2011, has done so in certain instances, read the letter.
The association claimed that the government's practices -- including unilateral price fixing and unreasonable delays in decision-making -- directly violated the legal framework designed to govern the sector.
The BVORBMA were based on arguments the article 12 of the Essential Commodities Marketing and Distributor Appointment Order, 2011, which details the process of determining mill gate, marketing, wholesale, and retail prices.
The Association stated that the Order granted the producer, refiner, or importer the power to 'reduce, increase or re-fix the price of edible oil in a reasonable and equitable manner.'
Their legal duty is to simply inform the government -- including the monitoring cell under the Ministry of Commerce (MoC), and Bangladesh Trade and Tariff Commission -- at least 15 days before the revised price takes effect.
According to the Association, implementation of a proposed price after the notification period is a right, not a deviation from the law.
Despite having such a provision, the refiners claimed, the government had resorted to unilateral price determination in some cases and had made 'unwanted interference' and caused delay in reviewing proposals.
The Association argued that the government's interventionist approach ran counter to Bangladesh's core economic policy.
They have also pointed out that Bangladesh operates as a 'Free Market Economy,' as mandated by the Constitution (Articles 15 & 40) and the Competition Act 2012, and as a member of the World Trade Organisation (WTO).
In a free market regime, the refiners contend, the government's role is to provide policy support for competition, not to set the price of products.
The refiners also highlighted how current tax policies, specifically the 15 per cent 'ad valorem VAT' on imported crude edible oil, exacerbated local price hikes.
Since domestic demand is almost import-dependent, a rise in the global price of crude oil directly results in a higher tax collection for the government, which is then passed on to local consumers, contributing to market instability, they mentioned in the letter.
Furthermore, the price ceiling set by the government is blamed for stagnant investment in the sector.
The inability to set premium prices stands in the way of creation of "premium brands and discourages new investors -- both domestic and foreign -- who are also unwilling to enter a heavily price-monitored market.
To help stabilise the market, the association had repeatedly requested the government to update the existing pricing formula in accordance with the Order of 2011.
Alternatively, they also urged the government to leave the price of edible oil to the market to deicide by ensuring a fair competitive environment and providing necessary policy support, consistent with the free market economy.
The association, however, acknowledged that the government was taking steps to review the outdated formula.

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