23/5/06 ISLAMABAD (Recorder Report) - The Pakistan Vanaspati Manufacturers Association (PVMA) has demanded reduction in customs duty and federal excise duty on import of edible oil in its budgetary proposals.

The association said vegetable ghee/cooking oil were an essential food items consumed by all the segments of society. It said the consumers were required to pay multiple taxes on edible oils.

It reminded that customs duty alone on imported edible oils ranges from Rs9,050 per ton to Rs10,800 per ton, around 30 to 42 percent of its cost per ton.

It added that total tax liability on the manufacture of vegetable ghee in terms of customs duty, federal excise duty and withholding tax alone ranges from Rs 16/kg to Rs 19/kg and it further increases on inclusion of sales tax on utilities, chemicals and packing material, which were ultimately borne by the consumer who were already facing abnormal price hike.

The association said multiple taxes on inputs of vegetable ghee are a heavy burden on the consumers. PVMA demanded reduction in taxes to give some relief to the consumers.

It said as a result of agreement with WTO, the government duty on different imported products is to be gradually reduced. Since the signing of the agreement, the government was reducing customs duty on imported product to bring the same in line with the consensus reached. However, vegetable ghee, despite its importance being kitchen item of daily use and its consumption by the lower class as a whole, was not included in the cascaded system.

It added that price-hike in edible oils was a world-wide phenomenon due to multiple reasons such as increase in consumption of edible oils, rise in petroleum prices and shortage of edible oils internationally because of its use as alternate fuel.

Due to constant rise in the price of petroleum products, 5 percent of the edible oil was being used as bio-diesel in European countries which has given rise to its consumption.

It said a PVMA delegation led by PVMA chairman recently visited Indonesia and Malaysia to attend an international forum where issues relating to edible oil shortage in future resulting from growing consumption and price-hike came under discussion.

As many as 1500 delegates were present in the forum and it was consensus there that due to unavoidable reasons, the price of edible oil will increase in next two to three years gradually world-wide. It said PVMA expects at least 8 to 10 percent increase in edible oil prices by the end of current year.

It suggested that the government keeping in view the importance of vegetable ghee as an essential food item of daily use should cut down taxes on edible oil.

Moreover, it said, the industry in Pakistan contributes over Rs 25 billion to the government exchequer in terms of duties and taxes and being the second biggest revenue generating industry after petroleum sector it needed special attention from the policy makers.

Unfortunately, it reminded, the government has never treated it at par with other food items industries.

It said heavy duties/taxes have made vegetable ghee unaffordable for the general public. It is recommended that to keep the price of vegetable ghee at an affordable level the government should reduce duty/ tax on it.

It demanded increase in customs duty on imported crude palm oil (CPO) and RBD palm oil.

It said CPO and RBD were hard oils and have high melting point. Any minor deficiency or mishandling of these hard oils during the transportation, storage and processing can make the finished product injurious to health.

The higher duty of Rs 10,800/ton on RBD palm oil has created a serious problem for the local industry since 2004-2005 when custom duty on CPO was reduced to Rs 9,000/ton.

It reminded that customs duty on imported coffee, black/green tea, rice etc is only 10 percent and even the customs duty on imported palm stearin used for manufacture of toilet soap, is 10 percent which is likely to be further reduced to 5 percent.

The imported Desi ghee, cheese in bulk, edible fresh vegetables, pulses and cereals are free of sales tax/FED.