Bangladesh Bank has taken yet another step to increase rice import to boost stock and stabilise the price level of the staple such that inflationary pressures can be contained.

From tomorrow, local traders can import rice on three months' deferred payment until December 31, 2017.

Earlier last month, the BB allowed traders to import rice at zero margin. This means importers will not have to make any advance payment to banks for opening letters of credit (LCs).

The steps were taken to encourage rice import as the price of the staple abruptly made a sharp rise in the backdrop of boro production being affected.

Also, the government last month lowered tariff rate for rice import to 10 percent from 28 percent.

Rice import by the private sector dropped to a four-year low last fiscal year, and this came at a time when its prices shot up in the domestic market.

Traders imported only 1.2 lakh tonnes of rice in 2016-17, down from 2.56 lakh tonnes a year earlier.

Taking advantage of the zero-tariff import facility, private importers brought in 3.75 lakh tonnes of rice in 2013-14 and 14.90 lakh tonnes the following fiscal year, flooding the domestic market with cheap Indian rice.

The government did not have to import rice since 2011-12 thanks to successive good yields.

To protect the local rice growers, the government imposed a high tariff of 28 percent on rice import in two phases in 2015. This year, the floods in haor areas and a disease in the northern districts hampered boro production. On the other hand, rice price has been soaring in the global market.

The government's food stock also decreased: on July 12 it was 3.29 lakh tonnes, 1.62 lakh tonnes of which were rice.

Besides, coarse rice price increased to Tk 48 per kg.

Food inflation almost doubled in rural areas to 7.2 percent in June this year from 3.44 percent a year earlier.

In urban areas, food inflation was 8.21 percent last month, up from 6.06 percent a year earlier.

Inflation rose because of the rice price spiral. In 2016-17 coarse rice price stood at Tk 39.18 per kg on average; in the month of June it was Tk 45.62.

The price increase prompted the government to take initiatives to import rice.

In May, the government struck two deals to import 50,000 tonnes of parboiled rice for $427.85 a tonne and another 50,000 tonnes of white rice for $406.48 a tonne.

Two weeks later, it signed a deal with Vietnam for importing 2.5 lakh tonnes of rice (50,000 tonnes of parboiled and two lakh tonnes of white rice) at a higher price. It agreed to pay $470 a tonne for parboiled rice and $430 a tonne for white rice.

Last week, the cabinet committee on purchase approved the import of 50,000 tonnes of rice at a cost of $430 per tonne. Only after the lowering of duty and the rise in demand in the local market did the private sector bump up their imports.

Last fiscal year, LCs were opened for 6.91 lakh tonnes of rice, according to food ministry data. In June alone, LCs were opened for 4.37 lakh tonnes of rice.

In 2015-16, LCs were opened for importing 3.5 lakh tonnes of rice.

As a result of the initiatives, the rice situation has eased slightly in the last one month. 

Yesterday, coarse rice sold at Tk 43 to Tk 46 per kg, which was Tk 46 to Tk 48 one month back, according to data from the Trading Corporation of Bangladesh. This means, in the last one month the price of coarse rice declined 5.32 percent.

In 2015-16, coarse rice price was Tk 36.42 per kg on average.