The National Board of Revenue yesterday cut customs tariffs on rice, sugar and dates and removed the value added tax on edible oil imports in an effort to help the government boost supply and contain prices of the four commodities during Ramadan next month.

The move comes more than a week after Prime Minister Sheikh Hasina directed the NBR to reduce import tariffs on these items to bring down the prices and overall inflation, which has been staying over 9 percent since March last year, eroding the buying power of the fixed- and low-income people.

The duty cut has raised hopes among consumers for some relief.

"It is a good initiative. But its outcome depends on ensuring adequate supply. The consumers will have the benefits only if the supply is higher than the demand," said Ghulam Rahman, president of the Consumers Association of Bangladesh (CAB).

"It is a good initiative. But its outcome depends on ensuring adequate supply. The consumers will have the benefits only if the supply is higher than the demand."

— Ghulam Rahman, president of the Consumers Association of Bangladesh

If the supply is not improved, the government will lose revenue and the businesses will profit, he added.

The NBR yesterday issued separate notifications on slashing customs tariffs and lifting the VAT.

Prices of rice have increased over the last few weeks as farmers completed harvest of Aman, the second largest rice crop.

The next crop, Boro, which accounts for 55 percent of total annual rice production, is being grown and its harvest will begin by the end of April.

To ensure adequate supply to the markets, the revenue authority lifted 25 percent customs duty on rice imports, apart from slashing regulatory duty to 5 percent from 25 percent.

The reduction will bring down total import tax on rice to 15.25 percent from 62.5 percent. The reduced import tariff on rice will remain valid until May 15 and the importers will require approval from the food ministry to bring the grains from abroad.

Two rice millers and traders, however, expressed doubt whether the cut will inspire imports of the staple given that neighbouring India maintains 20 percent tax on rice exports to discourage shipment from its territory.

Imports from India may not be profitable because of India's imposition of export duty, according to them.

Nirod Boron Saha, president of the Paddy and Rice Stockists and Wholesalers' Association in Naogaon, a major rice market in the north, said prices of the grain usually increase in India after duty reduction by Bangladesh.

"We need to wait for at least a day to observe how the market reacts there. In case of hike in coarse rice prices there, the possibility of import is low."

However, fine rice may be imported as the current prices in Bangladesh may encourage some importers, he added.

Other than India, Bangladesh will be able to import rice from Thailand which also produces parboiled rice, Nirod said.

A large rice miller and importer, seeking anonymity, said import of coarse and medium grains is unlikely because of the export curbs by India.

However, consumers may get some benefit from the removal of VAT from domestic processing and trading of soybean and palm oil.

The NBR also cut VAT on import of both refined and unrefined edible oil -- soybean and palm oil -- which Bangladesh has to import to meet 90 percent of its domestic requirement.

A top official of a leading commodity importer and processor said prices of edible oil may drop by Tk 5-Tk 6 a litre once the new consignment of edible oil, imported at the reduced VAT rate, reaches the country.

Bottled soybean oil was selling for Tk 158-Tk 165 a litre in Dhaka yesterday.

The current prices are higher than a month ago but lower than the same day a year ago, according to data from the Trading Corporation of Bangladesh.

Bangladesh consumes about 1.5 lakh tonnes of edible oil a month.

During Ramadan, demand for the essential commodity, used to make traditional snacks, rises to 2 lakh tonnes, according to estimates by the Bangladesh Trade and Tariff Commission (BTTC).

The VAT benefit will remain effective until April 15, according to the NBR.

Sugar may become a little cheaper following the reduction in specific duty for import of raw sugar to Tk 1,000 per tonne from Tk 1,500.

The official, however, said the impact may be negligible -- Tk 0.50 per kg -- as other taxes on sugar remain unchanged.

Yesterday, retail price of unpackaged sugar was Tk 140 per kg in Dhaka, showed TCB data.

The price of sugar, consumption of which doubles to 3 lakh tonnes in Ramadan, was 3.5 percent lower from a month ago.

The NBR said the reduced specific duty will remain effective until March 31.

In case of dates, the revenue authority also cut import duty to 15 percent from 25 percent.

BTTC estimates that Ramadan accounts for half of the 1 lakh tonnes annual requirement of dates. Following the duty cut, the total tax on dates import stands at 43 percent from 58.6 percent.

The new duty rates for import of dates have already become effective and will remain in force until March 30.

Fahmida Khatun, executive director of the Centre for Policy Dialogue, said the import tariff cut and VAT removal should lead to a decline in prices but "our past experience tells us that the price does not fall to the extent of tariff and VAT reduction".

She said market surveillance by the government is good now.

"If it continues in the supply chain of the commodities, prices may fall."