09/07/2008 (The Daily Times, Pakistan), Karachi - Due to higher import cost, the manufacturers of vegetable ghee and cooking oil are unable to control the prices and there is no option to control the prices other than reduction in taxes, Pakistan Vanaspati Manufacturer’s Association (PVMA) said Tuesday.

“Rising dollar, increasing cost of production, packaging material and heavy taxes on imported edible oil will fuel a further hike the price of ghee and cooking oil by around 10 percent”, former senior vice chairman PVMA, Mehboob Ali said.

The end user will bear the price brunt, especially during Ramadhan when the consumption spikes by around 20 percent besides higher cost of import on rupee/dollar parity, Ali added. Presently, he said, the total duties and taxes paid by vanaspati manufacturers are around Rs 27,000 per tonne. The PVMA, he said therefore, proposes the government to fix the FED on imported edible oils at the level of Cost and Freight prices of RBD palm olein as on July 2006. He said the PVMA proposes for a reduction of Rs 3,300 per tonne in the customs duty on the RBD palm oil/ palm olein, which is around Rs 9,800 per tonne.

The packing cost of 16 kg tins now stands at around Rs 105, which was Rs 80, which also results in increasing the sale price.

Currently, in the retail market, one kg packet of vanaspati ghee is priced at Rs 135 to Rs 140, depending on the quality, and cooking oil is charged at Rs 140 to Rs 145 per kg.

“Import increases by around 10 percent three months before Ramadhan on the back of growing domestic demand and consumption”, a senior member of Pakistan Vanaspati Manufacturers Association (PVMA), Nasir Ibrahim said. Imports are made under Malaysian Palm Oil Concessionary Trade Agreement (MPOCTA), like free-trade agreement (FTA), he added.

The importer has to pay around 45 percent duty on import value besides paying 50 percent import landing tax to the government, he added. Pakistan imports mostly Malaysian palm oil and olein to meet domestic demand of 1.99 million tonnes, as locally produced cottonseed meets around 0.59 million tonnes of the demand. Edible oil import costs around $1 billion.

The rate of sales tax is 16 percent and withholding and FED tax is charged at the rate of 2 percent on the imported palm oil.

He asked the government to rationalise the customs duty and other taxes on imported edible oil.

The government should levy regulatory duty instead of present fixed customs duty on imported edible oils, which should increase or decrease in proportion to the changes in the price of imported edible oils in the international market.

He proposed the government that the custom duty on imported vegetable ghee may be raised from Rs 10,800 per tonne to Rs15,000 per tonne to discourage import of vegetable ghee and to encourage more local production. He said the international prices of palm oil stood at around $1400 per tonne, the importers and millers paid around Rs 23 per kg more as Malaysian crude palm oil futures surged on increased international demand.