KARACHI: Price of imported palm oil rose unprecedented over 100 percent during the last 14 months due to strict lockdown in major producing countries that hampered the edible oil production and its supplies. The rising trend in prices of imported palm oil is a threat to inflation.
Malaysia and Indonesia are the main source of palm oil supplies worldwide, however, since the Covid-19 pandemic has spread palm oil production in these producing countries is facing huge problems due to continued and strict lockdown. The availability of workforce at the plantations is very minimal due to lockdown, which does not allow them to get the production of palm fruits in time.
Industry sources said that like all other commodities, global prices of edible oils and oilseeds are continuously increasing primarily due to supply constraints and shipping impediments. Global surge in prices is not only limited to edible oils but practically prices of all commodities like wheat, pulses, steel, sugar, chemicals and plastics are also rising because of supply chain issues. This is indeed very abnormal circumstances as post covid-19 the supply of commodities and shipping is not improving rather getting difficult.
They informed that the palm oil stocks level in Malaysia and Indonesia are very low and according to the experts, supply will remain a major problem in the near future. The consumer countries like India, China, Pakistan and Bangladesh will be much affected to get proper supply keeping the pace with their demand, they added.
Overall, the increase in palm oil prices is around 110 percent due to supply chain issues followed by lockdown in two major producing countries. The average palm oil prices were about $580 per metric ton CNF in May 2020 and now reached to around $1200 per metric ton in August 21. This upward trend is unprecedented and so far, there is no respite in prices.
In addition, the importers are not only paying fixed import duty they also pay 17 percent sales tax and 2 percent income tax, resulted in the increase of landed cost of edible oils.
This unprecedented increase in global prices is compounded with shipping problems as freight rates are not only firm but the supply of vessels is also not frequently available.
Industry sources informed that due to extreme dry weather in Brazil and Argentina, the production of soyabeans and soya oil are extremely compromised which has resulted in the unprecedented increase in the prices of soyabeans and soya oil.
Further the canola seed crop is extremely affected in Canada and this is for the first time that Canadian canola seeds are not available for export from April 2021 till December 2021.
Sources said that in view of the abnormal increase of 100 percent many governments in the world have given relief in import duty and other direct and indirect taxes aimed to ensure the availability of edible oil at reasonable prices.
However, the government of Pakistan has so far not given any relief to the consumer in this respect as the government is still collecting 100 percent taxes and duties imposed on the import of edible oil.
The sales tax collection is almost double on import of palm oil due to soaring prices in the world market.
Industry suggested the government of Pakistan can provide relief to the masses by rationalizing the sales tax structure from percentage to Fixed Pak Rupee per ton sales tax on the edible oil import till the reduction in the palm oil prices. This formula should apply to all edible oils including palm oil, soyabean oil, soyabean and canola seeds.
It may be mentioned here that Pakistan is dependent on the import of edible oil imports. Pakistan mainly imports around 3 million palm oil from Indonesia and Malaysia to meet its annual demand, Pakistan annual consumption is around 4.5 million tons that is per capita consumption of 20kg.
Copyright Business Recorder, 2021
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