Imports of edible oil are subjected to heavy taxation thus pushing the prices to new highs

Oct 27 - Nov 02, 2003

Malaysia is the world's top producer and exporter of palm oil for some years and now Pakistan is one of its top importers. In 2001, half or 11.8 million tons of the total 23.8 million tons of the palm oil produced in the world was produced in Malaysia. Malaysia exported 10.6 million tons of the palm oil produced representing 60 per cent of the world trade and palm oil contributes about 10 per cent to the GDP of the country.

Pakistan is heavily dependent on imported edible oils to meet the local demand which is increasing by each passing year. Being an essential kitchen item it has draw the attention of the government, the present as well as previous, to use it as a revenue generation tool like petroleum and products though at a lesser extent. According to an estimate, over 30 per cent or 650,000 tons of nearly 2.1 tons annual demand of edible oils in the country is met through local production while the remaining 1.5 million tons is met through the imports. About 10 per cent or 220,000 tons of the total 2.1 million tons of the local demand is used by the industries such as soap manufacturing.

Palm oil has wide spread food uses not only as a general purpose cooking oil but also used in the making of vegetable, or vanaspati, ghee, a much popular product in the Indo-Pakistan subcontinent but also in many other countries in West Asia. What has made palm oil even more attractive here is that it can be used on its own or blended with other vegetable oils to produce vegetable ghee.

As mentioned above the imports of edible oil are subjected to heavy taxation thus pushing the prices to new highs with each passing year. In addition to heavy levies, the international prices of palm olein also plays an important role to help determine the local prices which at times rise to uncomfortable levels.

For instance, the international prices of palm olein has registered a sharp 11 per cent increase during the las six weeks rising from $ 460 to $ 510 per ton. The import of RBD palm olein is subjected to a fixed duty of Rs 9,050 per ton, 20 per cent sales tax and 5 per cent income tax the total impact of the fixed duty, income tax and sales tax on a ton of imported edible oil add up to high 65 per cent at the landed stage. The sharp rise in the international prices of edible oil, thus, is feared to result in sharp increase in retail prices locally.

According to advertisements placed by Pakistan Vanaspati Manufacturers' Association (PVMA) the sharp rise in the international prices of edible oils has pushed the landed price of imported RBD palm olein from Rs 43,134 per ton on September 4 to Rs 49,000 per ton on the 16th of month October which translates into an increase of about Rs 7 per kilogram inclusive of government taxes and levies. The increased landed prices have, thus, pushed the prices from Rs 43.13 per kilo to Rs 49 per kilo including the government levies of Rs 21.

The PVMA has requested the government to reduce the duties and levies to help the manufacturers reduce prices during the holy month of Ramadhan, a practice that it claimed has become an yearly routine. The retail prices of edible oil have already gone up sharply registering an increase of Rs 60 to Rs 880 for a 16-kg tin of ghee while the price of a 16-kg cooking oil tin has crossed Rs 900. It is feared that the rising international prices and the high duties and taxes would push the prices of a 16-kg cooking oil tin to an unprecedented Rs 1,000 unless the government reduces the duties and taxes for the benefit of the consumers.

The country is heavily dependent on imported edible oils to help meet the growing local demand. It is projected that the country would be importing 1.6 million tons of edible oils, over 1.1 million tons of which include palm oil products 1 million tons of palm lein, 103,000 tons of crude palm oil and 164,000 tons of RBD palm oil.

According to the regional manager of Malaysian Palm Oil Promotion Council for Pakistan & Central Asian Republics, Faisal Iqbal, Pakistan is the top third importer of palm oil products from Malaysia after India and China. Talking to PAGE during his stay in Karachi he said that though palm oil more saturated than some other vegetable oils and more saturated than others it contains more monounsaturated fatty acids than most vegetable oils. Studies show that monounsaturates reduce LDL (low density lipoprotein) cholestrol and also help maintain HDL (high density lipoprotein) levels in the blood beneficial in protecting against risks of coronary heart disease.

He also said that the demand for palm oil is on the rise in the world as well as in Pakistan, a market 75 per cent of it is used in the manufacture of vanaspati ghee. What makes the Malaysian palm oil more attractive is that it has not only adapted well to the Pakistani taste but also costs much less than other edible oils such as soya bean, sun flower and canola from the US.