18/3/06KARACHI (Daily Times)  -  Encouraged by low tax rates on the import of crude palm oil (CPO), Pakistan’s leading edible oil buyers are planning to establish four new refineries with a 2,200 tonnes per day capacity, officials in the industry said on Saturday.

Most of the refineries will be operational by the end of 2007 and they will double Pakistan’s CPO refining capacity of 2,025 tonnes per day. “The tax advantage on the import of palm oil is the driving force behind the establishment of the refineries,” said Waheed Sheikh, chief executive of the Waheed Hafeez Group, a trading venture with Singapore’s Wilmar Trading Pte.

Pakistan charges a fixed amount of Rs 9,550 per tonne as regulatory and Customs duty on CPO imports in addition to 15 percent sales tax, but refineries are allowed to import CPO for Rs 9,000 per tonne. “CPO is also much cheaper than olein and the price difference is $ 25 to $ 30 per tonne,” Waheed said, adding, “So making a one-time investment in refineries is a good business proposition, which we have already seen in many countries.”

Waheed Hafeez Group’s venture with Wilmar Trading Pte will end by June 2006 and it has planned to establish a plant with a European firm. Waheed said that the initial cost had been estimated at Rs 400 million rupees and construction would start later tin the year.

Currently, five refineries are operational in Pakistan and while the country’s leading refinery in terms of capacity (1,000 tonnes per day), West Bury Pvt Ltd, will become operational in April.

The Habib Oil Mills (Pvt) Ltd and Hamza Vegetable Oil and Ghee Mills have also planned to set up plants. “Our requirement of palm oil is around 4,300 tonnes per day and with the establishment of the new refineries, we will see an increase in CPO imports over the next two or three years,” said Akbar Puri, chief executive of the Karachi based Agro Commodities.

Pakistan is the world’s fourth largest consumer of vegetable oils with a domestic demand of 2.5 million tonnes, 90 percent of which is covered by imports, mostly of Malaysian RBD palm oil and olein.

According to the government’s data, Pakistan spent $ 421 million on the import of 965,478 tonnes of vegetable oil in the first seven months of the fiscal 2005-06, whereas the country bought 844,627 tonnes for $ 417 million in the same period last year.

Officials estimated annual imports of 1.6 million tonnes of palmoil from Malaysia, majority of which will be refined palm olein.

They said they expected the imports of edible oil to increase by seven percent annually because of population growth, rapid urbanisation and rising per capita income in Pakistan.

“Afghanistan’s demand is also supporting our imports and around 10 percent of our purchases go there,” said Ahkter Ashraf, a trader in the northwestern city of Peshawar. reuters