Tanvir Haydar Pavel
Director( Finance and Commercial), City Group
Interviewed by Raiyan Rabbani, Team MBR

Tanvir Hydar Pavel is currently working as Director (Finance & Commercial) of City Group. He was born in Dhaka and earned his BSc in Chemical Engineering from the Indian Institute of Technology Roorkee, India and his MBA from the Institute of Business Administration, University of Dhaka. Previously, he worked in the financial sector with stints in multinational banks like HSBC Bangladesh and a leading non-banking financial institution, IDLC Finance, for around 15 years. He is a General Body Member of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI). Team MBR was in a conversation with Tanvir Hydar Pavel and was fortunate enough to receive his take on the flour milling industry in Bangladesh.

Raiyan Rabbani: In Bangladesh, the current consumption of wheat flour products is around three times the consumption in the year 2000. What are the factors driving this changing consumer behaviour?

Tanvir Hydar Pavel: If we look back, the price of wheat flour was much lower than the price of rice, sometimes even half the price of rice. For the rising lower-middle income class of our country, the price of the product is a great factor when deciding on what to buy. So, when the price of wheat flour is BDT 25 per KG in comparison to rice, which is BDT 50 per KG, people in this segment prefer to consume wheat flour. This is one of the major components that I have observed over the last five years.

Other than this, there has been a change in lifestyle. The disposable income of general people has increased with the increase of middle-income people. Fast food consumption is on the rise, particularly among the

younger generation. A key ingredient of fast food is wheat flour, and therefore the change. Besides, working parents do not have the time to prepare home-cooked meals. So, the demand for ready-to-eat meals is increasing which has flour in its ingredients mostly. So, the main four factors of changing behaviour are price, overall food habits and lifestyle, change in demography and social structure, and the changing food habits of children.

Raiyan Rabbani: The demand for wheat has risen significantly over the years, but our local production of wheat has failed to keep pace with the growing demand. What are the factors responsible for hindering the growth of wheat production?

Tanvir Hydar Pavel: One important thing to consider is that Bangladesh has a limited land area, which cannot be increased, whereas the population continues to increase. In fact, our land area is very small compared to any other country with this size of population. Naturally, net cultivable land is also small given that the number of cultivable crops is huge, which includes rice, corn, etc. So, if wheat production has to increase, corn, sugarcane, or any other production has to be reduced. Ultimately, the production ratio has to be balanced. This is one of the reasons.

Another reason is the decreasing price of wheat over the last few years, which makes it non-profitable for farmers to produce. For example, demand for rice is high, and thus the price is high. As a result, farmers have an incentive to produce rice as it is profitable. So, I think these are the two main factors responsible for hindering wheat production.

Raiyan Rabbani: In recent times, we have observed that large conglomerates are coming into the business of flour milling. What are the factors that are motivating these conglomerates to engage in the flour milling business?

Tanvir Hydar Pavel: This goes back to the case of demand and supply. There is demand and a market for wheat products. Our company entered this market a long time back, and so did other age-old conglomerates. This phenomenon is nothing new. Currently, new companies are entering the market given the opportunities. City Group has been in this industry for more than 25 years, as it has been a growing market till this time.

Raiyan Rabbani: From the old-fashioned chakki meals to the modern roller mills, the flour milling industry has experienced a significant transition in the aspect of automation. How is the industry performing in terms of efficiency in comparison to the global benchmark?

Tanvir Hydar Pavel: From what I know, the output is the thing to be considered. If 100 KG of wheat is broken down, the ratio of ‘bhushi’ and flour is an important factor. The percentage of output has certainly increased. Another factor is that running the factories requires energy, such as gas. Modern European mills like roller mills consume less energy than traditional mills. Also, they are more environmentally friendly as dust is not released with this production method.

With these new mills, the cost of production is also lower due to economies of scale.

Raiyan Rabbani: More than 80% of the country’s demand for wheat is being met through imports. What are your suggestions to reduce this increased dependence on imports?

Tanvir Hydar Pavel: Again, since we are a small country, the total area of land is not adequate. The majority of the items that we cannot produce on our land have to be imported. We can only change the composition of the imports. So, what has to be remembered is that increasing the yield of one crop means another crop needs to be imported. The utmost we can do is to increase the local productivity of crop production on existing land and thus somewhat reduce the volume of imports. So, we can work on increasing yield and productivity. However, the overall substitution of foreign imports is not practically possible. Imports can only be reduced by a certain amount temporarily, but this cannot be a long-term strategy.

Raiyan Rabbani: Bangladesh used to depend on Russia and Ukraine largely for the import of wheat. How has the industry been impacted in the face of the war between the two aforementioned countries? Are there signs of recovery already?

Tanvir Hydar Pavel: Honestly, imports have not yet been impacted by the war as there is still a sufficient supply of stocks, and prices are still low in the market. Our wheat market has not yet faced a crisis in the production of wheat-related products. Will it affect us in the future? I do not think so, as shipments from Ukrainian ports have started again. Meanwhile, there have been corrections to the price. Other major sources of our imports include Canada, the United States, and Australia, where prices have also been reduced. So, no major impact is foreseeable.

Raiyan Rabbani: The country has experienced significant progress in the field of rice research, which has helped the country to be somewhat self-sufficient in rice production. What are your thoughts regarding research and innovation in the central segment?

Tanvir Hydar Pavel: Of course, there is an opportunity for more research, and there is still some form of research going on for grain and corn. But, considering the sudden increase in demand for flour-based products, the level of research is still not adequate in comparison to rice. There is definitely room for research on wheat and other crops. Since the area of our land is not adequate, we should focus on finding ways to increase the yield of crops. That is the only way we can survive.

Raiyan Rabbani: Do you think that the policy support is adequate to help the flower milling industry be self-sufficient in the near future? What else can be done to foster the pace?

Tanvir Hydar Pavel: Import duties for wheatrelated products are low or zero. So, I think that the government is really promoting and supporting the flour milling industry in Bangladesh. Although we are import dependent, other value-added products are being exported as well. The government is also giving cash incentives for such exports. But, if the government supports more research and development, productivity and development in this field will increase even more and create a positive economy. This will then create less dependence on imports, and exports can then be increased.