MARKET DEVELOPMENT
Tax cuts on cooking oil, Ghee likely
Tax cuts on cooking oil, Ghee likely
2/6/07 (The News, Pakistan) - ISLAMABAD: The government is considering proposals to reduce the taxes on cooking oil and Vanaspati Ghee in the country. The decision in this regard is likely to be announced in the budget 2007-08.
The representatives of Pakistan Vanaspati Manufacturers' Association (PVMA), Sh Abdul Waheed and Sh Abdur Razaq, have suggested to the government to reduce the taxes of Rs 23 on per kilogram cooking oil and Ghee. The representatives are of the view that presently the international price of palm oil is $850 plus.
The government is collecting 15% sales tax on the imported palm oil. Last July, its price was less than $450 per ton. Thus, the income of the Central Board of Revenue (CBR) from this sales tax has doubled. Since the prices of 16 kilogram ghee tin have been raised up to Rs 1,350 in the wholesale market, the consumers are facing lot of financial burden.
The representatives further stated that this is the election year. In the federal budget, the government should reduce the customs duty being charged at the rate of Rs 10,800 per ton and other taxes. Due to these taxes, the price of the edible oil has been raised Rs 23 on per kilogram.
During the public hearing by the National Tariff Commission on the proposal of Pakistan Edible Oil Refiners Association (PEORA), Pakistan Vanaspati Manufacturers Association registered its reservation against the PEORA proposal for reduction of customs duty by Rs 1,000/-per ton on import of CPO.
PVMA mainly focused its viewpoints on the following: On the basis of FOB/C&F prices of crude palm oil, RBD palm oil in and RBD palm oil dated May 25, 2007, the landed price of crude palm oil works out to Rs 72,052/-per ton while that of RBD palm oil in and RBD palm oil works out to Rs 75,109/ and Rs 76,807 per ton respectively.
Hence, the CPO importers are enjoying an advantage of Rs 3,057/-per ton over the palm oil importers and Rs 4,755/-per ton over the RBD palm oil importers, leaving no justification at all for further reduction of customs duty on import of crude palm oil.
RBD palm oil has melting point of 37(+) or (-) 2 and is convertible to vegetable ghee even without further processing. As a result, cottage type units are engaged in direct filling of RBD palm oil, creating serious health hazard for the general public. The government, during the budget 2001-2002, had reduced the customs duty on RBD palm oil for discouraging its import to avoid direct filling playing havoc with the health of the consumers.
Import of crude palm oil does not generate job opportunity as most of the refineries are fully automated requiring not more than 10 to 15 persons per refinery. Most of the CPO refineries have in-built capacity for the manufacture of vegetable ghee. Due to cheaper availability of palm oil, they will take over the entire market.
On the other hand, PVMA member units employ about 250,000 persons directly or indirectly and hence it will be unwise to sacrifice a large number of manpower to benefit a small number of CPO refineries.
Presently, there are about 100 vegetable ghee/cooking oil units which are members of PVMA. Assuming average investment of Rs 100 million per vegetable ghee/cooking oil unit, a total investment of Rs 10 billion has been made in this industry. Hence, PVMA feels that the government while encouraging CPO refineries will not ignore the existing investment in the vegetable ghee/cooking oil industry and affect over 2,50,000 families.
The representatives of Pakistan Vanaspati Manufacturers' Association (PVMA), Sh Abdul Waheed and Sh Abdur Razaq, have suggested to the government to reduce the taxes of Rs 23 on per kilogram cooking oil and Ghee. The representatives are of the view that presently the international price of palm oil is $850 plus.
The government is collecting 15% sales tax on the imported palm oil. Last July, its price was less than $450 per ton. Thus, the income of the Central Board of Revenue (CBR) from this sales tax has doubled. Since the prices of 16 kilogram ghee tin have been raised up to Rs 1,350 in the wholesale market, the consumers are facing lot of financial burden.
The representatives further stated that this is the election year. In the federal budget, the government should reduce the customs duty being charged at the rate of Rs 10,800 per ton and other taxes. Due to these taxes, the price of the edible oil has been raised Rs 23 on per kilogram.
During the public hearing by the National Tariff Commission on the proposal of Pakistan Edible Oil Refiners Association (PEORA), Pakistan Vanaspati Manufacturers Association registered its reservation against the PEORA proposal for reduction of customs duty by Rs 1,000/-per ton on import of CPO.
PVMA mainly focused its viewpoints on the following: On the basis of FOB/C&F prices of crude palm oil, RBD palm oil in and RBD palm oil dated May 25, 2007, the landed price of crude palm oil works out to Rs 72,052/-per ton while that of RBD palm oil in and RBD palm oil works out to Rs 75,109/ and Rs 76,807 per ton respectively.
Hence, the CPO importers are enjoying an advantage of Rs 3,057/-per ton over the palm oil importers and Rs 4,755/-per ton over the RBD palm oil importers, leaving no justification at all for further reduction of customs duty on import of crude palm oil.
RBD palm oil has melting point of 37(+) or (-) 2 and is convertible to vegetable ghee even without further processing. As a result, cottage type units are engaged in direct filling of RBD palm oil, creating serious health hazard for the general public. The government, during the budget 2001-2002, had reduced the customs duty on RBD palm oil for discouraging its import to avoid direct filling playing havoc with the health of the consumers.
Import of crude palm oil does not generate job opportunity as most of the refineries are fully automated requiring not more than 10 to 15 persons per refinery. Most of the CPO refineries have in-built capacity for the manufacture of vegetable ghee. Due to cheaper availability of palm oil, they will take over the entire market.
On the other hand, PVMA member units employ about 250,000 persons directly or indirectly and hence it will be unwise to sacrifice a large number of manpower to benefit a small number of CPO refineries.
Presently, there are about 100 vegetable ghee/cooking oil units which are members of PVMA. Assuming average investment of Rs 100 million per vegetable ghee/cooking oil unit, a total investment of Rs 10 billion has been made in this industry. Hence, PVMA feels that the government while encouraging CPO refineries will not ignore the existing investment in the vegetable ghee/cooking oil industry and affect over 2,50,000 families.