Domestic edible oil prices have declined as refiners reduced their rates after the government drastically cut the value added tax (VAT) on the key cooking ingredient in a bid to ease the pressure on consumers who are being battered by rising food inflation.

The price of loose palm oil, the most widely used type of edible oil, has fallen by as much as 12 per cent to Tk 131-136 per litre in Dhaka city, where the same amount would cost Tk 150-155 a week ago, according to data on market prices compiled by the Trading Corporation of Bangladesh (TCB).

Similarly, soybean oil -- both loose and bottled -- also became cheaper over the last one week.

Md Masud Mia, owner of the Bhai Bhai General Store in Karwan Bazar, was found asking for Tk 760 for a five-litre container of soybean oil, the price of which crossed Tk 800 earlier this month amid slow release, stock piling and panic buying in the wake of rising global prices due to Russia's invasion of Ukraine.

The price hike and scarcity of cooking oil prompted the National Board of Revenue (NBR) to slash VAT on such products in two phases since March 14.

The NBR initially removed the 15 per cent VAT, a kind of consumption tax paid by consumers, at the production stage and 5 per cent at the trading stage.

Two days later, it cut the VAT on imports to 5 per cent from 15 per cent in response to refiners' claims that prices would not decline to a meaningful extent unless the indirect tax on imports of raw and refined palm oil as well as soybean oil is reduced.

The government reduced the price of soybean oil by up to 5 per cent on March 20 after a meeting with edible oil refiners. Processors later cut prices of loose palm oil as well.

Golam Mawla, a wholesaler in Moulvibazar, a wholesale hub of essential commodities such as edible oil, said prices of the key cooking ingredient declined after the government's move.

"Traders here are selling loose soybean oil at Tk 136 per litre," he said.

The government fixed the price of loose soybean oil by reducing it from Tk 143 each litre. It also cut retail prices of bottled soybean oil to Tk 160 per litre and Tk 760 for five litres.

However, TCB data showed that traders were selling five-litre containers of soybean oil for as much as Tk 790 while one-litre bottles were going for Tk 165 on March 25.

On the other hand, some traders such as Mohammad Rakib Hossain, a salesperson of Al Amin Traders in Karwan Bazar, were found selling below the government fixed prices.

He was selling five-litre containers at Tk 740 and one litre bottles at Tk 160.

"The supply shortage that we saw a few days ago is over for now," he said.

Mawla of Moulvibazar said millers should keep the supply chain smooth to keep prices stable.

"The government should also monitor major points of the supply chain, such as mill gates and distributors, to ensure that all are getting edible oil properly," he added.