With mutually contradictory claims of the government and the Pakistan Vanaspati Manufacturers Association, on the outcome of the recent talks the association had with Industries and Production Minister Jahangir Khan Tareen, and Central Board of Revenue Chairman, it will appear that the quandary around high prices of vegetable ghee and cooking oil is unlikely to end in the near future.
This has reference to a Recorder Report appearing last Tuesday. Quoting PVMA Chairman Amjad Rasheed, it said that no decision was taken to reduce the prices of ghee in the meeting with the minister. Reference, in this regard, was made to a PVMA statement, which pointed out that the government handout, had made it appear that an agreement on a cut in ghee/cooking oil prices was reached.
Ostensibly, to clear the resulting confusion, it denied conclusion of any decision on a cut in ghee/cooking oil prices at any of the two meetings with the government. More to this, the statement averred that the PVMA had told the Minister and the CBR Chairman, that relief to consumers could be possible only in the event of the government cutting down duty on the import of RBD palm olein.
It also pointed out that the initiative for a cut in ghee/cooking oil rested with the government, and that it should take the first step by lowering duties and taxes, totalling Rs 18.77/kg.
Significantly, PVMA also emphasised that benefit proportionate to the cut in duty and taxes, which it viewed as the only way to reduce the price of this important kitchen item, should go to the consumers.
Failing which, it saw no chance of reduction in the price of vegetable ghee/cooking oil, saying the PVMA member units were operating on a very marginal profit, with no leverage for reduction in prices. Again, paying that they had earlier maintained the prices when old stocks of edible oil were available, the situation had now changed.
The PVMA Chairman explained that ghee manufacturers had increased prices by Rs 22 per kg from Rs 800 to Rs 1150 per 16 kg during the July-December 2006 period in the wake of price hike of palm oil products in the international market. This he attributed to heavy rainfall and floods in Malaysian palm cultivation regions, resulting in price escalation of palm products touching the highest level of $650 per ton towards the end of December, 2006.
As for now, he said that although prices of palm oil products had declined to $620 per ton, they remained out of Pakistani manufacturers' reach. According to him, prices of ghee in the local market are based on $450 per ton of palm oil products, while the prices in international market now stand at $620 per ton.
As such, he argued that local manufacturers would be able to reduce prices of ghee by Rs 5-10 per kg only when the prices of palm products would decline in the world market, at least by $100.
The PVMA chairman further stated that no cut would be possible in the face of Rs 20,000 per ton government tax on import of palm oil products. More to this he noted that their problems were further exacerbated by Rs 9200 per ton custom duty, Rs 6700 per ton sales tax, Rs 1700 per ton income tax, and Rs 1000 per ton excise duty on import of palm oil products.
Hence he demanded linkage of customs duty with international prices of palm oil products, and creation of a mechanism to assess and to fix, customs duty in line with the international prices of the products.
In this regard, mention may be made to PVMA's suggestion to follow India-like formula for adjustment of import duty and fixing of cooking oil and ghee prices on import parity basis, saying that it would allow fluctuations in cooking oil and ghee prices in accordance with international market rates of palm olein.
It was in June last year when PVMA demanded reduction in federal excise duty on imported edible oil to 6 percent, on the plea that it would provide immediate relief to the consumers.
Earlier, the association had raised the issue with the CBR and had suggested an increase in customs duty on imported crude palm oil (CPO) and RBD palm oil, maintaining that they were hard oils with high melting point, and any minor deficiency or mishandling during transportation, storage and processing could make the finished product injurious to human health.
According to PVMA, the government was maintaining customs duty of Rs 10800/ton on RBD palm oil to contain its import, as compared to RBD palm olein, with customs duty of Rs 9050/ton, which was soft oil.
The problem could be traced to the 2004-05 budget which effected reduction in custom duty on COP to Rs 9000/ton, equivalent to soft oils like RBD palm olein and crude de-gummed soybean oil, ignoring the health hazards of COP/RBD palm oil. One is apt to wonder that with all the emphasis on increasing production of oilseed within the country, Pakistan must still continue to depend so heavily on import.
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