ISLAMABAD: The constant increase in global prices of palm oil and higher duties and taxes structure on import of edible oil may result in higher prices of banaspati ghee and cooking oil in the coming months.

Abdul Waheed, Chairman Pakistan Vanaspati Manufacturers Association (PVMA) told Business Recorder that since November, the palm oil prices in the international market is witnessing an upward trend, which is continuing till to date.

On December 18 (Friday) the C&F price has touched eight years high of US $960/M Ton and in his opinion the price may cross US $1,000/M Ton benchmark by the end of December, 2020.

The market shall stay bullish in the next quarter or first quarter of 2021 in-step with other edible oils such as soybean, canola, and sunflower.

The incidence of exorbitant rate of duty/taxes on import of edible oil is yet another factor resulting into higher prices of end products such as banaspati ghee and cooking oil.

The stocks of palm oil in Malaysia are at historical low levels of 1.4 million M Ton, which is again putting pressure on prices prevailing in the international market, moreover India and China, the two largest buyers of palm oil, have also initiated buying to replenish their inventories.

Abdul Waheed added that in February/March 2021 the international buying to meet the increased demand due to Ramazan may also result in upward pricing of edible oils including palm oil.

There prevails a very intense competition among manufacturers of Pakistan, therefore, the present price of banaspati/cooking oil is just in-line and in-step with the landed cost of edible oils.

Tax experts have added that due to levy of sales tax, sales tax in value addition mode and income tax, calculated on percentage basis of C&F price, therefore, it is out of hands of industry to extend concessions on end products.

With the increase in C&F price the rate of duty/taxes also make a sizeable jump, resulting into even higher retail prices of banaspati ghee/cooking oil, since 90 percent of raw materials are import dependent.

In addition, any increase in US$ rate or devaluation of Pak rupee will have a devastating consequence, obviously to be borne by end consumers.

Since the products are included in staple food items, therefore, the government of Pakistan must reduce the duty/taxes on import of edible oil.

Business Recorder has learnt that two consecutive meetings have been held recently between the PVMA and the Ministry of Industries and Production to review the prices of palm oil in the international market, and its impact on banaspati ghee and cooking oil.

Copyright Business Recorder, 2020