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Soap manufacturers demand to lower the import duty

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The reduction in import duty on palm by-products will encourage the local soap industry

By Syed M. Aslam
Nov 15 - 21, 1999

Discriminatory rate of duty is forcing the local soap industry to use expensive varieties of tallow compared to cheaper varieties of palm by-products. It is also discouraging imports of palm by-products of vegetable fat from Muslim countries such as Indonesia and Malaysia compared to more expensive tallow substitutes of animal fats from the US, Europe and Australia.

Since June 1997, the import duty on all varieties of tallow has been reduced from the then maximum slab of 45 per cent to 15 per cent while palm by-products, an inedible product like tallow, are still bracketed with palm oil, an edible product, to draw the maximum import slab of 35 per cent. While palm by-products are subjected to a maximum import duty of 35 per cent toilet soaps are allowed to be imported at 25 per cent duty while imported laundry soaps are subjected to a similar tariff to further worsen an already bad situation for local manufacturers.

Pakistan imports a variety of tallow and palm by-products, both non-edible products and both inter-changeable basic raw material for soap manufacturing. Tallow is a more expensive product compared to palm by-products.

Though interchangeable, tallow is a much more expensive product compared to palm by-products. The international prices of various varieties of tallow— top white, extra fancy, 11 A &B, 19-21 and low grade— presently runs between $ 350 per metric tonnes for the low grade to $ 450 per tonne for Top White. In comparison, the international prices of the varieties of palm by-products are much lower— between $ 130 per ton for the least expensive palm residue of fatty substance to $ 270 per tonne for the most expensive palm stearin variety.

However, the discriminatory tariff has turned the import of cheaper palm by-products more costlier than the import of tallow at the expense of the soap users on the one hand and the potential savings of foreign exchange to the government on the other.

Talking to PAGE, the secretary of Pakistan Soap Manufacturers Association, Amin U. Shaikh, said that bringing the import tariff on palm by-products from 35 per cent to 15 per cent at par with tallow could have the government save $ 6 million annually.

He said that Pakistan imported 100,000 tonnes of tallow and 40,000 tonnes o palm by-products of various varieties last year. Reducing the tariff on the import of palm by-products and bringing it at par with tallow, he said, would encourage the import of much cheaper palm substitutes. This in turn would help the government save some 6 million dollars in foreign exchange annually as well as production of quality soaps which could be avialble to the people at compratively lower prices.

The abolishment of the discriminatory import tariff encouraging import of more expensive tallow would also help acheive other distinct advantages. It would help provide laundry soaps to the people at lower prices. It would also encourage local soap industry to be competitive in the international markets, a goal which at present remains unattained primarily due to high discriminatory duty on the import of palm by-products and also high input costs like electricity, gas, water, etc.

Amin said that at present some 2,500 soap manufacturers nationwide— comprising 11 fully-automatic plants manufacturing toilet and laundry soaps, another 120 semi-automatic plants in the organised sector and the rest in the unorganised sector— are producing a total of 240,000 tonnes of soap annually. Of the total 240,000 tonnes soap produced locally every year, 200,000 tonnes or 83 per cent comprise washing soap while the rest of 40,000 tonnes is the toilet soap.

There are many varieties of tallow. Top white tallow is used in the manufacture of toilet soaps. Extra fancy and low grade tallows are used in the manufacture of laundry soaps. Palm by-products can completely substitute tallow in the manufacture of laundry soap. Either tallow or palm by-products are singly used for soap manufacture.

Palm by-products could also also be substituted for tallow in the manufacture of toilet soap. The most expensive variety of palm by-products; palm stearin, can be used in the manufacture of toilet soaps.

Amin said that reducing the tariff on palm by-products from 35 per cent at par with 15 per cent for that on tallow would not only encourage the local soap industry to switch over to a cheaper alternative but to be more flexible to pass the davantage of low international prices of palm by-products to the consumers.

The imposition of the maximum import duty of 35 per cent on palm by-products at par at finished goods seem to stem from a misunderstanding rising from the definition of fatty acid in the chemical dictionary. The dictionary says that palm fatty acid is used in the manufacture of cosmetics, a luxury item.

However, the Association said that the palm fatty acid distillate is used in the soap manufacture in Pakistan for the last 6 to 8 years. Since it is permanent brown in colour it can only be used in the manufacture of laundry soaps.