19/8/06 ISLAMABAD  (Business Recorder)  -  : The Ministry of Industry and Production has recommended to the federal government that the rate of customs duty on RBD palm olien and palm oil should be reduced by Rs 4,000 per tonne to offset the impact of increase in prices in the domestic market, official sources told Business Recorder here on Friday.

Prices of ghee and cooking oil have increased by Rs 6 per kg because of hike in international price up to $100 per tonne and ministry presumes that the rising trend in cooking oil prices would continue, the sources added.

"The rate of customs duty on RBD palm olien and palm oil be reduced by Rs 4,000 per ton to bring the prices at the level of June," the sources quoted the ministry as suggesting.

The ministry has also floated an idea that customs duty should be reviewed every 15 days as is being done in India to ensure that the impact of increase in palm oil prices is not reflected in the domestic edible oil/ghee prices, the impact of which has been calculated around Rs 500 million per month, the sources maintained.

The sources said the ministry has forwarded these recommendations to the federal government after close monitoring of wholesale and retail markets on daily basis.

The Industries Ministry has confronted with the Federal Bureau of Statistics (FBS) of the prevalent prices, which did not indicate real increase in edible oil and ghee prices.

According to the FBS, the prices of ghee have increased by Rs 2 per kg, but the ministry's own survey revealed Rs 4 per kg increase for some brands. However, a ghee manufacturer said that prices were raised by Rs 6 per kg due to hike in palm oil prices at the international level, besides increase in cargo and local transport charges.

The ministry has indicated that the prices of edible oil/ghee would further increase in Ramazan prices of palm oil in the international market would continue.

The total domestic demand of edible oil is around 2.7 million tonnes with domestic production at around 1.2 million tons per annum. The balance is met through imports.

Ghee sector is heavily dependent on import of palm oil and the prices of edible oil and ghee are directly linked with international prices as from December 2004 to June 2006, the prices hovered around $400 per ton. However, since the international prices of oil crossed $70 per barrel, palm oil prices were increased by 15 per cent to $480 from $415 per tonne as it is being increasingly used as bio-fuel, prominent users of which are Brazil, Indonesia and Malaysia.

Increase in freight from $25 to $40 per tonne was also among the factors, which increased prices in the local market. The prices committee headed by the Prime Minister's Advisor on Finance, Dr Salman Shah meets twice or thrice in a month, but it has yet to decide that what it has to do to stabilise prices of different commodities as the prices are continuously increasing.