KARACHI (February 06 2004): The entire ghee industry in Pakistan has beenparalysed reportedly by heavy burden of duty structure imposed by thegovernment which is almost 75 percent of the C&F value.

Talking to Business Recorder, the industry sources said Pakistan importsabout 70 percent of its edible oil requirements to run its ghee industry.

In spite of the fact that the local production of edible oil is notenough, the incidence of the duty structure is very heavy, they said.

The sources said: "It clearly means that import of edible oil isgenerating heavy revenue for the government amounting to Rs 2.58 billionper annum.

Recently, the government has given certain duties exemption on the edibleoil import in the shape of DTRE (Duty and Tax Return Exemption), and oilmeant for ghee industries in Fata/Pata. Such exemptions have provedcounter-productive due to misuse of facilities.

"The DTRE facility which is 'no duty no drawback' is meant for export ofghee to Afghanistan. The government has allowed duty-free and GST-freeimport of palm oil under DTRE rules for ghee export to Afghanistan.

"This exemption has opened Pandora's box as ghee, which is meant forexport is ultimately sold in the Pakistan market.

This has created a crisis in local markets as there is no level playingfield between the importers of edible oil, who have to pay around 75percent duty plus GST, and the one, who is exempted from duty to importedible oil."

The market sources are surprised at the wisdom of policy-makers inallowing someone to get 75 percent duty exemption and export ghee. This,in fact, is a great motivation to misuse the exemption.

Such folly on the part of the government has resulted in the over importof palm oil, glut in the local markets and the closure of solventextraction plants. Only last week, the solvent industry decided to closetheir operation by February 10, 2004, if the government does not stop DTREand rectify the situation.

Similarly, the government policy to give exemption of GST on edible oilimport for ghee industries located in Fata/Pata areas is an anotherblunder. This is a pure political decision which is ruining the industry.

The ghee industries located in Fata/Pata areas are hardly operative;however, these industries are importing oil and avail full exemption ofGST and sell oil in the local markets, thus not only depriving thegovernment of large revenue, but also flooding the local market.

The market sources believe that the government should act fast and stopDTRE facility for export of ghee to Afghanistan. In any case,Afghanistan's requirement of ghee per year is hardly 50,000 tonnes, andthat market is served by Iran and Dubai.

Pakistan being net importer of edible oil cannot justify exporting gheewith duty exemption.

In fact, Pakistan should act as the gateway for transit facility toAfghanistan importers of edible oil.

Similarly, there should be no GST exemption for Fata/Pata areas, theyshould develop a fool-proof system of sales tax refund to these units, whoproduce ghee and not sell edible oil.