ISLAMABAD: The ghee and cooking industry has informed the Finance Ministry that India has slashed duties on import of RBD Palm Oil and Olein by 16.50 percent and soybean oil and sunflower oil by 19.25 percent from October 14, 2021 against Pakistan, where duty/taxes on import value of these items is over 29 percent.
The comparison of duties and taxes structure of neighbouring countries on the import of palm oil, olein, soybean oil and sunflower oil has been prepared by the Pakistan Vanaspati Manufacturers Association (PVMA).
The industry has also requested the Federal Board of Revenue (FBR) to immediately reduce duty/taxes on the import of these items to provide relief to the general masses. According to the industry, the prices of edible oils all over the world have seen an unprecedented surge due to constraints in the supply chain and its diversion towards biofuel.
This phenomenon is not Pakistan specific but prevails globally. Pakistan though falls among most distressed countries, since its local oilseed crop meet only 10 percent of national demand thus, imports 90 percent of edible oil to meet national demand, which hovers over 4.5 MT per annum.
The industry is fully cognisance of the prevailing situation, which is indeed very unfortunate. Due to this enormous increase in prices, not only the duties/tax component has gone up butfurther compromised the cash flow situation of the industry.
When contacted, Tariq Ullah Sufi, chairman PVMA, stated that in July 2019 the C&F price of RBD palm oil was recorded USD 520/MT and the USD exchange rate was Rs 157. With this price and USD exchange rate the quantum of duty/taxes per MT was around Rs 34,000. However as of October 2021 the price has surged to USD 1367 and applicable interbank USD exchange rate has crossed Rs 171.
Due to unprecedented increase in international market price, USD rate and other taxation measures adopted in the last two fiscalyears, now the applicable rate of duty/taxes totals to Rs 68,500 per MT i.e. an increase of Rs 34,500 or say an increase of Rs 34.50/kg.
In order to save the masses from the harsh impact of food inflation, our neighboring country India has slashed the duties on import of RBD palm oil and olein from 37.75 percent to 19.25 percent i.e. a decrease of 16.50 percent.
Likewise, the duty structure on soybean oil and sunflower oil has also been revised downwards by up to 19.25 percent. The revised duty structure has come into effect on 14th October 2021 and will remain in-force up to and inclusive of 31st March 2022. It is worth noting that it is for the second time, the reduction in duties have been notified since start of the current year.
In Pakistan, as of now, on percentage basis, the quantum of duty/taxes on import value is over 29 percent, which needs to be slashed heavily to ensure the sustainable imports by manufacturers. Due to cash flow problems in-case the importers retard their imports, shortage of raw material and hike in prices of end products cannot be ruled out.
Although 100 percent sales tax and income tax has been waived off on import of edible oil by units located in tax exempt areas, which on end has reduced size-ably the revenue of national exchequer and on other end has disturbed the import pattern of units located in taxable areas, besides creating uncertainty in market sentiments. Units located in tax exempt areas have a cushion of Rs 70-80/kg in terms of relaxation in duty/taxes to trade of the imported raw material and end products in settled areas partially wiping out the units located in taxable areas from transparent and fair competition.
This anomaly and its negative impact on revenue collection has already been observed by the FBR. Due to dwindling available stocks and prevailing market uncertainty the price hike in the near future over and above the factors such as international market price and USD exchange rate is quite imminent, the chairman PVMA added.
The chairman PVMA stressed upon the Government of Pakistan to take a quick decision in reduction of duty/taxes to provide relief to masses and counter the factors of shortages immediately.
Copyright Business Recorder, 2021