Sugar imports shot up exponentially in the 11 months through May upon expectations of a lenient government policy on refined sugar exports and the zero-duty status granted to raw sugar imports.
Imports rose 87 percent to 15.77 lakh tonnes in July-May from the same period a year earlier, according to Bangladesh Bank that compiles data on letters of credit settlement.
Golam Mostafa, chairman of Deshbandhu Sugar, however, suggests that the total volume of sugar imports could be even higher than the LC data imply as payments are typically deferred by six months.
Mostafa attributes the spike in imports to the processing capacity of refineries, which were expanded in anticipation of relaxation of government restrictions on refined sugar exports.
While ASM Mohiuddin Monem, secretary general of Bangladesh Sugar Refiners Association, attributes the surge in imports to the zero-duty import facility bestowed upon sugar — both raw and refined — imports.
“All parties reaped advantage of the policy and imported sugar as much as possible,” said Monem, also the deputy managing director of Abdul Monem Group which runs AM Sugar Refinery Ltd.
For instance, the state-run Bangladesh Sugar Food Industries Corporation and Trading Corporation of Bangladesh imported more than 150,000 tonnes of refined sugar in fiscal 2011-12.
Mostafa expects the sugar imports to hit the 17-18 lakh tonne-mark for the 2012 calendar year, a significant rise from the 14.79 lakh tonnes recorded for 2011.
Expectations of higher prices during Ramadan induced a disproportionate amount of imports and created a glut, said Abul Hashem, secretary of a merchants association based in Moulvibazar, a major wholesale destination.
“Retailers are now competing against each other to get rid of the mountains of sugar they are sitting on,” said Hashem, who had previously served as a vice-president at the Bangladesh Sugar Merchants Association.
“As was bound to happen, the price of sugar dropped in recent months,” Hashem said.
Monem, too, said supply exceeded demand to push down the prices and squeeze out the profits.
“We sold sugar below our costing price during Ramadan because of the drop in price thanks to the excess imports. We have incurred massive losses,” Monem said.
Sugar prices recorded by the Department of Agricultural Marketing in markets in Dhaka yesterday were Tk 53-55 a kg, a fall by almost 2 percent from the Tk 54-56 a kg registered a month ago.
And in comparison to last year’s price of Tk 65-70 per kg, yesterday’s figures are roughly 20 percent less.
“We have higher than necessary processing capacity for the local market. The government should now allow exports of refined sugar,” Mostafa said.
Local mills’ have a processing capacity of 35 lakh tonnes, when the local demand is 15 lakh tonnes a year.
Taking into account BSRA’s estimate that the domestic consumption of sugar grows by 7.5 percent a year, the processing capacity even then seems excessive.
Earlier, private refiners had urged the government to waive the restrictions on sugar exports imposed in March 2010 to increase the supply of sugar to the domestic market and arrest price spirals.