Sugar price: a few suggestions

These people have reacted very quickly to international posted price (available on internet). Had the price fallen, their reaction would have been slow. In that case they would have inflated their stock figures and stated that they could not lower prices of goods in stock, imported at higher price! Today they are making a windfall, because the higher priced sugar needs at least six to eight weeks, if not more, from opening letter of credit to reaching Bangladesh port and another two weeks before it reaches the retailer. Meanwhile the higher retail price is a windfall!

At US$ 500 per metric ton and assuming US$=Tk. 68 (open market) the landed cost at our port (C&F) comes to US 55 cents per kg. Including cost of handing, transport and usual product loss in handling, storage and transport and adding a modest ten percent margin at each stage the price at the retail shop works out at around Tk. 58 per kg. Probably the profit margin is around 20 percent at each level when the retail price per kg comes to around Tk. 65.

To create a buffer stock and prevent large price fluctuations, and stabilising the sugar market the government should as a matter of policy speedily encourage local sugar refining form raw sugar, as Bangladesh needs to import at least around 60 to 65% of its sugar needs. By refining sugar locally and giving them the needed support to import raw sugar at lower price, the import duty should be drastically lowered if not eliminated to encourage local sugar refining. Here, the long market chain will be eliminated, as sugar refineries will directly import sugar and the refined sugar will go directly to the wholesalers and / or retailers. FOB price advantage of over US$ 40 per ton for raw sugar should encourage local sugar refining industry, create new economic activity, save foreign exchange, boost local value addition and contain the retail price of sugar. The government can easily monitor sugar-refining costs and ensure a proper wholesale and retail refined sugar price. This is more pragmatic and permanent solution, rather than what we are doing now.