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UPDATE 2-Bangladesh nearly doubles rice import duty to boost local farmers

* Raises import duty to 55% from 28%, second hike in a year

* Domestic prices fall to lowest in 3 years amid ample supply

* Plans to export surplus rice to protect farmers’ interests

* Duty hike to impede Indian exports to Bangladesh, say traders (Adds quotes, details)

DHAKA, May 23 (Reuters) - Bangladesh has raised import duty on rice to 55% from 28% to support its farmers, officials said on Thursday, amid widespread protests over a drastic fall in domestic prices.

The new tax rates, that came into effect on Wednesday, would further curb rice imports, especially from neighbouring India, which emerged as the biggest supplier to the South Asian country in 2017 after floods destroyed its crop.

The move would help protect farmers’ interests as growers are being compelled to sell their rice at lower rates than the cost of production, a food ministry official said.

Local rice prices have fallen to their lowest in three years due to ample supply from last year’s crop and forecasts of record output. Farmers have vented their anger over the falling prices of the staple grain by burning paddy.

The duty hike will make it nearly impossible for India to export rice to Bangladesh, traders in India said.

“Exports to Bangladesh is not possible after the duty hike,” said a New Delhi-based dealer with a global trading firm.

Bangladesh re-imposed a previous import duty of 28% in June after reducing it in two phases in 2017 to 2%, as local rice prices climbed to a record high.

Domestic stocks have since greatly improved on the back of massive imports and good crops of rice, the staple grain for the country’s 160 million people.

Despite a hefty import duty, private traders imported more than 330,000 tonnes of rice in the July-April period, government data showed.

The government will procure more rice from local farmers to protect them from any distressed sales, food minister Sadhan Chandra Majumdar said on Thursday.

“We are building 200 silos across the country so we are able to procure more rice,” he said, adding that farmers would benefit from these silos from next year.

Bangladesh is planning to export surplus rice for the first time since banning overseas sales of some common rice varieties in May 2008 when there was a spike in domestic prices. It banned all rice exports a year later.

The country, which imported a record 3.9 million tonnes of rice in the year to June, has a surplus of 2 million tonnes to 2.5 million tonnes of rice, another food ministry official said.

“The duty hike will support (domestic) prices only in the short term. Bangladesh needs to export the surplus to ease pressure on prices in the medium term,” said a Mumbai-based exporter.

Bangladesh’s rice production is expected to rise 7 percent to 34.9 million tonnes in the year to April from the corresponding period last year, due to higher acreage and yields, the U.S. Department of Agriculture (USDA) said. (Additional reporting by Rajendra Jadhav in MUMBAI; editing by Rashmi Aich and David Evans)

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