Traders reluctant to import rice despite tariff cuts

Rice traders in Bangladesh are less interested in importing the grain despite the recent slash in related tariffs as they do not believe there is enough of a profit margin because of high prices on the international market.

They added that doing so would have little effect on reducing domestic prices at this time.

The retail price of rice has been rising ever since severe flooding across the country's Northeastern region in August impacted the cultivation of Aman season paddy.

So, to prevent further hikes in prices due to reduced yields of Bangladesh's second-largest rice crop, the interim government tried to encourage imports and boost local stocks by lowering the import tariff.

In a circular on October 20, the National Board of Revenue (NBR) reduced the import tariff on rice to 25 percent from 62.5 percent.

The NBR said the reduction came in response to the widespread flooding, which raised concerns over a potential supply shortage in coming months.

The revenue authority also informed that the tariff reduction would lower the import cost by Tk 14.40 per kilogramme (kg).

However, millers said that importing rice from India is not financially viable even with the reduced tariff as market prices are similarly high in the neighbouring nation.

Moreover, associated costs like transportation mean that prices of imported rice would reach far higher than local varieties.

On condition of anonymity, a major rice importer said it is very unlikely that anyone would consider buying the grain from abroad considering current market conditions.

For example, even if the import duty was reduced to zero, the price of imported fine rice would reach Tk 80 per kg and coarse rice Tk 76 per kg after factoring in all related costs.

In contrast, locally grown fine rice is currently being sold domestically for around Tk 65 per kg and coarse rice for Tk 55 per kg.

The importer also said rice prices will likely decrease after the Aman and Boro rice harvests hit the shelves, further diminishing the need for imports.

Nazir Hossain Prodhan, another major rice importer, echoed those sentiments.

"At this price point, no one will import rice. As a result, prices in local markets will remain elevated in the near term."

An importer based at the Hili land port in Dinajpur, preferring to remain unnamed, said some people may consider importing rice after about a month.

This is because rice prices in India are expected to drop after it removed stringent conditions on rice exports as the upcoming harvest will likely be sufficient for domestic consumption.

The reduced supply of rice has been a driving factor in the rising prices of the grain in kitchen markets across Dhaka.

Traders said that the cost of rice has increased by Tk 50 to Tk 150 per 50 kgs in some areas over the past week.

For example, the popular BR-28 and BR-29 varieties have seen significant price hikes, with 50-kg sacks now selling for Tk 3,000 to Tk 3,100 compared to Tk 2,850 to Tk 2,950 just a week earlier.

The price of medium-grain rice increased by about 1 percent over the past week and about 2 percent over the past month, according to data of the state-run Trading Corporation of Bangladesh.

On an annual basis, the price of fine rice rose 9.09 percent while that of medium-grain rice shot up 11.43 percent. Prices of coarse rice increased 7.14 percent.

On October 23, the government of India eased export restrictions on non-basmati white rice by removing the minimum export price of $490 per tonne. The move came a day after India lifted its 10 percent export tax on parboiled rice.

However, while these measures may help ease international prices for the grain, local importers remain sceptical about the viability of imports considering current prices.

Md Habibur Rahman Hosaini, an additional secretary of the food ministry's procurement and supply wing, said some importers have made inquiries, but no official applications for rice imports have been filed.

He also opined that traders may hold off on imports for the moment.

This year's supply disruption follows record rice yields in fiscal year 2023-24, when the country produced more than 4 crore tonnes of rice, doing away with the need for imports up until as recently as October 23, according to sources within the food ministry.

WHAT INDIAN EXPORTERS SAY

Rice exporters and millers in India welcomed the recent moves to ease export restrictions, claiming they would help stabilise both domestic and international prices ahead of upcoming festive seasons such as Diwali, Christmas and New Year.

BV Krishna Rao, president of the Rice Exporters Association, told The Daily Star that the international demand for rice remains strong and they are optimistic about reclaiming the orders lost due to previous restrictions.

Dev Garg, vice president of the Indian Rice Exporters Federation, said: "The floor price had prevented Indian farmers and exporters from selling some relatively cheaper grades on the global market."

The Indian government's decision would boost rice exports, with shipments expected to top 22 million tonnes by March next year, according to Rajesh Paharia Jain, an exporter based in New Delhi.