New Tariff on Imported Tea

While the growing domestic consumption leaves a huge gap in demand for and supply of tea, additional tariff on imported tea is likely to increase prices of the beverage.

Tea Traders Association of Bangladesh (TTA) has urged the government to withdraw new 20 percent regulatory duty imposed on import of tea on the ground that it will hurt mass consumption of the beverage.

The government has imposed 20 percent regulatory duty on imported tea in a bid to protect the local tea industry. National Board of Revenue on January 8, 2012 issued an SRO to the effect of levying the new duty. 

Until then, the import tax on tea was 60 percent. Adding the additional duty, importers now ave to pay 80 percent tax on imported tea, sources in NBR said. The government increased the duty in response to a proposal of Bangladesh Tea Sangsad.

The 60 percent supplementary duty was imposed a long time ago to discourage tea import so that the domestic procurers do not feet threatened. An influential group of garden owners lobbied with the government to increase the duties by 20 percent, a leader of the Tea Traders Association of Bangladesh said in recent statement.

The traders claim that the incremental tariff is going the affect their business and they resent that it will speciously undermine the huge investment they have made over the years to ensure that the most popular beverage in the country can reach the drinkers.One member of the association told First News that the new tariff has made imported tea costlier, which will also raise the price of domestic tea since domestic supply alone cannot meet domestic demand. 

The unrealistic import duty will result in higher prices for the beverage and the ultimate sufferers will be the tea lovers of the country, according to TTA. The export of tea in 2011 was 12.92 million kilograms that has dropped to 9.01 million kilograms. The local consumption of tea has reached 20 million kilograms.

Tea production in the country had been increasing at a rate of only 2-3 percent per year against a local consumption growth of 8-9 percent, creating a huge demand-supply gap. According to a report of the Commerce Ministry, export of tea will stop after 2016 because local consumption rate of beverage is outpacing the local production. The country imported 4-5 million kilograms of tea in 2010 despite heavy import duty, the association said.

The tea production in Bangladesh from 1980 to 2010 increased by 48 percent. In 1980, it was 40 million kilograms and in 2010, 59.16 million kilograms whereas domestic consumption between this period increased from 9.1 million kilograms to 62.98 million kilograms. 

There are 163 tea gardens in Bangladesh stretching over an area of 115,820.33 hectares of land. The area suitable for tea cultivation is 61,334.63 hectares although tea is grown on 54,106.24 hectares of land, according to Bangladesh Tea Board (BTB). The number of tea factories in the country is 116.

The had been on of the major export items of Bangladesh since 1971, but that scenario changed in recent years because of open market economy, new suppliers entering the world market with low priced tea, and rapid increase of internal demand in Bangladesh.

According to BTB, Bangladesh exported 3.15 million kilograms of tea worth 433.5 million taka in 2009. 

The production in other countries has experienced significant growth. For example, Vietnam produced 40.2 million kilograms in 1995, but in 2009 production went up to a whopping 154 millon kilograms marking a 283 percent growth.

Pakistan was a big market for Bangladeshi tea, but that been lost because the price of Bangladeshi tea is much higher than prices of similar quality tea available in the international market from other countries.

Due to rapid infrastructural development, huge investment in brand building, massive promotion and awareness, easy availability, increasing population and growing purchasing power of people, tea consumption has increased at a rapid pace. Tea cultivation has turned into a profitable business over the last on decade. 

At present, good quality tea is selling at 165-180 taka per kilogram at the Chittagong auction. But at the same time, a huge quantity of low-grade tea is also produced and offered in the auction which are proving difficult to sell. The average price this season is the second highest it has ever been for a season.

Experts are concerned that tea being a poor man's beverage, unrealistic prices will only result curtailing consumption , and will force consumers to look for other alternatives. If that shift happens, then it will be difficult to biring them back into the tea drinking habit. "We should allow domestic consumption to grow at its natural pace and take measures to increase production to meet the total market need," the Tea Traders Association said.

HSBC Launched young Entrepreneur Challenge 2012

HSBC Bank, Dhaka, Bangladesh

For the sixth year in a row, the Hongkong and Shanghai banking Corporation (HSBC) Limited in Bangladesh lunched the Young Entrepreneus Challenge (YEC) 2012 - a business plan competition for undergraduate students - through a media conference held on February 7. 

Aimed to promote the enterprising spirit among students across different Asia Pacific countries, the competitions starts with teams (each comprising of two to four members) submitting their business plans at the YEC website (www.asiayechallenge.com/bd) by March 7,2012. Having passed through two level of screen9ing and workshops on entrepreneurial skills and knowledge, five best teams will present their plans to a panel of experts at the Bangladesh Finale. Three bet teams at this level stand to win prize money of 75,000, 45,000  and 35,000 taka respectively.

The Champion team from Bangladesh will compete at the regional Grand Finale in June 2012. The Grand Finale of YEC 2012 will be marked by the participation of champion teams from HongKong, Malaysia, Thailand, Shanghai, Philippines, Brunei and Bangladesh.

HSBC Bangladesh CEO Andrew Tike reiterated HSBC's commitment to promote and nurture the talented youth of Bangladesh through harnessing creative ideas and providing real-life exposure to its future entrepreneurs. "I am confident that we will see a flurry of innovative business ideas from Bangladeshi teams, and the legacy of Bangladesh's success at the regional Grand Finale will continue," he add.

The Wine Effect

Surveys show that the US states where wine is cheaper the rate of traffic fatalities is also lower.

Canadians are belived to have word out a policy that could reduce alcohol consumption by setting a minimum price for beer, wine and liquor. Wonk blog reader and Cornell University economist Brad Rickard has passed along new research he has done on the economics of alcohol consumption. This time it is to be done by making wine cheaper and more available.
Now, how is it possible that drinking will be cheaper yet its harmful effect will be reduced? In working paper for the American Association of Win Economists, Rickard and his team looked at the states that allow grocery stores to sell wine, versus those that limit such sales to liquor stores. Because of increased competition amongst the grocery stores to sell wine, it leads to both lower wine prices and higher rates of wine consumptions.
This is where the secret lies. The states where wine makes up larger part so total alcohol consumption tends to have lower rates of traffic fatalities. "Overall, these results indicate that an increase in beer and spirit consumption, as a share of total alcohol consumption, increases traffic fatalities," Rickard and his team write. “Where an increase in wine consumption as a share of total alcohol consumptions decrees traffic fatalities."
This conclusion makes sense because it was also corroborated by earlier studies. In 2007, the Journal of Preventive Medicine study concluded that wine was the least common alcohol consumed in binge drinking, which accounted for about 10 percent of binge-drinking episodes. Beer, in contrast, accounted for two thirds of binge-drinking episodes.
Since drinking-related traffic fatalities are on the rise in many American cities, Richards’s Work has drawn attention. It is not how much people drink as opposed to what they drink that is important. Nothing is wrong if state policies can encourage wine drinking by making it available and affordable to make the best of both worlds. People will get to drink to their heart's content and the number of traffic fatalities will come down at the same time.

GMG in Financial Crisis

Country's first private airline GMG is now faced with a huge financial crisis as it owes 459.3 million taka to the Civil Aviation Authority of Bangladesh (CAAB) and 180 million taka in travel tax to National Board of Revenue (NBR).

Under the circumstances, the airline is taking some cost-cutting measures and planning to cut down its operation and lay off a significant number of workers soon. It already closed some of its domestic and international routes, including the Dhaka Jeddah route since December 16 last year.

The GMG authority has already decided internally to suspend operation on most of the long-haul routes where Boeing 767-300 Extended Range planes were flying. The airline is now flying on there international routes instead of previous sis. Fearing loss of jobs, some of the employees have already switched to other airlines. Now it has 1,000 employees compared to 1,150 before.

This company has eight planes, three Boeing 767s, three McDonnell Douglas MD-80s and two Bombardier Dash-8s. One MD-80 and one Dash-8 have been stranded for a long time. GMG Airline started its journey in 1998 and Beximco Group bought the lion's share of it in 2009.

CNG Auto-rickshaws Do Not Use Meters

Only 5,000 uot of 12,000 auto-rickshaws operating in Dhaka City have obtained attestation from BRTA, but even those refuse to run on meters

The CNG auto-rickshaw drivers are back to business as usual, running on contracted fare instead of meter

Meter fare system does not work when it comes to CNG auto-rickshaws. The drivers are using the successive hikes in gas price as an excuse to charge arbitrary fares on every single route in Dhaka City and they refuse to use meters. Initially police were active in catching those auto-rickshaws, which were running without meters. They used to stop auto-rickshaws and ask passengers if they were traveling on metered fare or "contracted" fare. Passengers often told the truth and then police fined the drivers.

Gradually that changed and, instead of fining the driver, police started taking bribes. So now it does not matter if a passenger tells the police, because the auto-drivers know they will be let off the hook if they pay.

Even though it was planned that from March 28 last year onwards a mobile court would be set up with at least six experienced executive magistrates to ensure that the drivers did not charge higher fare than what the meter showed, they have not yet been seen on the roads till today. So CNG drivers are having a field day on the doad harassing passengers by charging fares to their heart's content. However, chairman of Bangladesh Road Transport Authority (BRTA), Md. Ayub-ur Rahman, said, "If any CNG auto-rickshaw driver refuses to accept fare by the meter, he faces punitive imprisonment of up to two months under the law. In the last four months, 130 CNGs have been detained and 127 drivers have been punished."

A source form BRTA informed they had publicly announced that if CNG drivers declined to comply with the meter fare, they would face punishment in the form of termination of their route permit as well as imprisonment. However, to implement that law, neither the BRTA mobile court or their magistrates nor any measures form DMP have been noticed on the road.

Instead, the auto-rickshaw drivers have become more aggressive and they are ever more arrogant in their refusal to operate by the meter. A commuter named Kabir Hossain had to hire a CNG numbered Dhaka Metro tha-13-3410 for 200 taka to take him from Gulshan to Shahbagh. He was, however, taken on board by the driver on the condition that if the police or the mobile court stopped them he would have to say that he was going by the meter. Having no other choice, Kabir still got into the CNG reluctantly accepting the condition from his driver.

To make it appear that his vehicle was running on meter, the driver left the meter on the same situation was observed with other CNG auto-rickshaws numbered Dhaka Metro tha-13-3895, Dhaka Metro tha-14-20478, Dhaka Metro tha-14-2849 and Dhaka Metro tha-14217. Drivers said they did not concur with regulations obliging them to take passengers under a fixed rate by the meter.

On January 12 last year, the government signed a trilateral agreement with the Auto-rickshaws would be set at 25 taka for the first two kilometers and then seven taka for every additional kilometer traveled. Furthermore, during stoppages and waiting at signals, 1.25 taka would be incurred per minute. At the same time, the deposit to the owners was determined at 600 taka per day. The agreement also stipulated that if the driver charged more than that indicated by the meter and if the owners asked for additional deposit from the drivers, they would face termination of their route permit and other punitive actions.

Sources inform that out of 12,000 auto-rickshaws in Dhaka, fewer than 5,000 took a letter of attestation from BRTA as evidence of getting their meters adjusted to the new rates. BRTA officials confirmed that the remaining 7,000 auto-rickshaws did not bother to obtain the attestation later. So it can be assumed that they are illegally running without meters

Rule and Practice?

It has become a rule in Bangladesh and perhaps a norm also elsewhere that prices that rise seldom come down. The sellers show reasons for rise, but when the reasons do not prevail, the keep their spiral prevailing. In fact, "inflation remains a growing challenge for the economy as soaring prices of food and fuels are showing no sing of relent (Prices Are Downward Rigid, January22).

We have been facing inflation for four decades now. Rather, it is inflation that is showing no sign of relent. During this period, we often experienced some relief in soaring of prices. While it is the cartel of greedy traders who are benefiting from the price spirals, the real producers - both farm and pactory - are not making much money.

Inflation is one cause that may not be checked at once, but the government should promptly tackle the other causes it it must save the economy. The people need a relief from the oppressive burden of runaway prices