6/1/07 (Reuters) ISLAMABAD - Pakistan is likely to review import duty structure on palm oil by February in response to a Malaysian request to cut the tariff, a senior government official said yesterday.

"The request is already being studied intensively and the matter will be determined before the FTA (free trade agreement)," said the official at the Food and Agriculture Ministry, who asked not to be named. The two countries are expected to finalise the FTA in February.

"We are considering what is the best closure," the official said, declining to give any further details.

Pakistan had received a duty-cut request during a visit by Malaysian Prime Minister Datuk Seri Abdullah Ahmad Badawi in November.

Pakistan is the world's fourth largest consumer of vegetable oil, 90 per cent of which is covered by imports, mostly of Malaysian RBD palm oil and olein. The country's domestic demand is 2.5 million tonnes.

The country charges a fixed 9,500 rupees (100 rupees = RM5.95) a tonne as regulatory and customs duty on palm oil imports, besides a 15 per cent sales tax.

Similarly, Islamabad charges 9,550 rupees per tonne on crude palm oil import along with a 15 per cent sales tax. But refineries are allowed to import crude palm oil against a duty of 9,000 rupees per tonne.

According to government data, Pakistan spent US$721.41 million (US$1 = RM3.52) on vegetable oil imports of 1.67 million tonnes during the fiscal year 2005-06 (July-June). Palm oil imports stood at 1.63 million tonnes, worth of US$699.98 million.

Industry officials estimate an annual import of 1.6 million tonnes of palm oil from Malaysia, a major portion of which will be refined palm olein.

They expect the edible oil imports to increase 7 per cent annually, owing to population growth of about 3 per cent, rapid urbanisation and rising per capita income.

Meanwhile, in Jakarta, the Trade Ministry said in a statement yesterday that Indonesia has raised base export prices for palm oil products to bring them in line with international levels,

The new prices will be applied from January 10 to February 9.

The base export price for crude palm oil has been raised to US$458 a tonne from US$430 (US$1 = RM3.52), while refined, bleached and deodorised (RBD) palm olein, used as cooking oil, has been raised to US$488 a tonne, from US$447.

The base export prices for RBD palm oil and crude palm olein have both been raised to US$477 a tonne from US$437 a tonne.

The ministry has raised base export prices for palm kernel to US$82 a tonne from US$78.

Base prices are used to calculate the amount of tax paid by exporters.

Crude palm oil is subject to a 1.5 per cent export tax, while other palm oil derivative products are subject to a 0.3 per cent export tax. Palm kernel is subject to a 3 per cent export tax. - Reuters