20/11/06 KARACHI, (Asia Pulse) - Pakistani trade authorities are considering a Malaysian request that it cuts its import duty on palm oil by about 20 per cent, a senior official said on Thursday. Ismail Qureshi, permanent secretary at the Ministry of Food and Agriculture, said the government had received a request to cut the import duty during a visit of Malaysian Prime Minister Abdullah Ahmad Badawi this month.

"We exchanged a requests-and-offers list to be considered before we enter a free trade agreement between the two countries, and a duty cut on palm oil imports was part of the list given by the Malaysian government," Qureshi told Reuters. He said the government was discussing the request with all stakeholders and would only decide after consulting all parties involved in the edible oil trade.

"It will take some time to take a decision which suits everyone, especially our farmers," he said. The government charges a fixed Rs9,500 (US$156) a tonne as regulatory and customs duty on palm oil imports, apart from 15 per cent sales tax. Similarly, it charges Rs9,550 per tonne on crude palm oil import besides 15 per cent sales tax. But refineries are allowed to import crude palm oil against a duty of Rs9,000 per tonne.

Pakistan is the world's fourth largest consumer of vegetable oils, with a domestic demand of 2.5 million tonnes, 90 per cent of which is covered by imports, mostly of Malaysian RBD palm oil and olein. Domestically produced cottonseed oil covers the rest. According to government data, the country spent $721.41 million on vegetable oil imports of 1.67 million tonnes during the last fiscal year 2005-06. Palm oil imports stood at 1.63 million tonnes worth $699.98 million.

Industry officials estimated annual import of 1.6 million tonnes of palm oil from Malaysia, a major portion of which will be refined palm olein. They said they expected edible oil imports to increase seven per cent annually because of population growth of about three per cent, rapid urbanisation and rising per capita income. A senior official at the Ministry of Commerce said the government was likely to cut the import duty by 10 per cent as pressure from local refineries, apart from the Malaysian government, was also mounting.

Main edible oil buyers have planned to set up four new refineries with a total capacity of 2,200 tonnes a day. The planned refineries, most of which will become operational by the end of 2007, will double the country's crude palm oil refining capacity, which is now 2,025 tonnes a day. "Refineries want a cut in customs duty on imports of crude palm oil because of its high prices in the international market," said the commerce ministry's official.

"There are chances of closure of a few refineries if the international prices remain high and if the government fails to rescue them by cutting the import duty."

(PPI)