Mymensingh's MRT Agro Faces Crisis Selling Corn Oil to TCB Over VAT Dispute
Mymensingh-based MRT Agro, a producer of corn oil, is facing significant financial difficulties after securing a contract to supply 2 million liters of oil to the Trading Corporation of Bangladesh (TCB). The company is struggling with a 10% Value Added Tax (VAT) liability, amounting to 17.5 Taka per liter, which is causing substantial losses. This financial strain has forced MRT Agro to temporarily halt operations for the past two months, and they are now on the verge of complete closure. The company is appealing for the VAT to be withdrawn, stating that the production cost is 170 Taka per liter, and with all expenses, they are currently subsidizing each liter by 20 Taka. This situation makes sustained business operations impossible. So far, MRT Agro has supplied approximately 15% of the contracted amount, about 300,000 liters. Rofiqul Islam, a director at MRT Agro, explained that the market price for corn oil is 190 Taka per liter, making it unsustainable to continue business with a subsidy. He believes that as a local producer, they should be exempt from VAT, but this specific oil is not listed in the Special Regulatory Order (SRO) for VAT exemptions. Both the Ministry of Commerce and TCB have recommended the withdrawal of VAT to the National Board of Revenue (NBR) on July 20th, following a letter from MRT Agro to the Ministry of Commerce on June 9th. The initial contract price was set at 175 Taka per liter. The VAT deduction would bring the effective price down to 157 Taka per liter, which is not viable compared to the market price of palm oil at 185 Taka per liter. MRT Agro argues that withdrawing VAT would boost domestic production, reduce import dependency, and encourage new companies to enter the corn oil market, similar to rice bran and mustard oils. Agricultural officials also see potential in corn oil due to increasing domestic corn production, noting its comparable nutritional value to soybean and sunflower oils. TCB's Chairman highlighted that VAT withdrawal would support domestic industry, local investment, reduce import reliance, and create jobs, making corn oil more affordable than rice bran oil. However, the NBR has stated that granting such exemptions is difficult at this stage due to budget constraints, although they will review the proposal.
The situation highlights a systemic challenge in fostering domestic industries through government contracts, particularly when tax policies create financial disincentives. MRT Agro's struggle underscores the critical need for alignment between procurement objectives, tax regulations, and market realities. While the government aims to boost local production and reduce import dependency, the imposition of VAT on a nascent domestic product like corn oil, without specific exemptions, renders the contract economically unviable. This creates a contradiction where policy intentions to support local enterprise are undermined by fiscal mechanisms. The NBR's stance on budget constraints, while understandable from a fiscal management perspective, overlooks the potential long-term economic benefits of nurturing a new domestic supply chain. A review of the SRO to include corn oil, or a temporary VAT rebate for TCB-contracted producers, could reconcile these competing interests, promoting food security and economic diversification without significant fiscal strain, especially given the relatively small initial volume compared to TCB's total monthly demand.
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