PVMA calls for cut in taxes to lower ghee, cooking oil prices

LAHORE: The Pakistan Vanaspati Manufacturers' Association (PVMA) has proposed a reduction in a number of duties and taxes, as well as amendments, to lower the prices of ghee and cooking oil to Rs15-20 per kilogram/litre.

The suggestion was made in the PVMA budget proposals sent to the Federal Board of Revenue (FBR) for fiscal year 2023-24. PVMA asked the Federal Board of Revenue (FBR) to bring back the federal excise duty (FED) regime and increase its rate by Rs1-3/kg instead of imposing 18 percent, which would not only give a fixed revenue to the government but also reduce the prices of ghee by Rs5-8/kg.

Banaspati and cooking oil fell under the FED regime, consequently attracting FED at 18 percent and Re1/kg (FED in value-addition mode) both levies charged and collected at import stage. However, in Finance Act, 2019-20 ‘import and manufacturing’ was shifted from FED to sales tax regime. Consequently, the sales tax is now being charged on actual value-addition carried out by the manufacturers, which varies in the range of Rs7-10/kg. Earlier the fixed rate of FED (sales tax) was levied at Re1/kg vide SRO 24(I)/2006 dated January 7, 2006.

The PVMA proposed that to ensure stability in local prices, FED regime should be brought back, while it also urged to remove additional custom duty of 2 percent from edible oil. To fulfil the Prime Minister’s vision and directives for controlling inflation of food items, especially at a time when dollar rate is at an all-time high, this will bring end consumer prices down by Rs6-7/kg.

All import levies of sales tax and income tax for the FATA/PATA units should be collected at import stage, while refunds should be made after getting their consumption certificate duly scrutinised and verified. The government should also review the import volume by the FATA/PATA units as there has been huge distortion between their import volume and consumption pattern.

Pakistan’s per capita consumption is 20kg and the import volume of FATA/PATA has to be linked with the population’s official figures available in the Pakistan Economic Survey. In the first nine months of the current financial year (July-March 2023) the units imported around 180,000 tonnes of edible oil against their annual consumption of only 40,000 tonnes or so.

The PVMA asked to reduce the custom duty on import of crude degummed soybean oil (CDSBO) from Rs10,550/metric tonne to Rs9,050/metric tonne. Earlier through Finance Act, 2017-18 the Custom Duty on import of CDSBO was enhanced by Rs1,500/tonne. Apparently, the custom duty was enhanced to promote local cultivation of soybean by farmers, which unfortunately could not materialise, prove viable.

However, still the custom duty is charged at Rs10,550/tonne, ie previously from Rs9,050/tonne to existing Rs10,550/tonne. It is on record that enhancement in CD at that time has resulted in the exorbitant increase in the prices of cooking oil. The temporary increase in CD should be reversed. The CDSBO is consumed in manufacturing of cooking oil and blending in banaspati, both being staple food items consumed by poor masses. Further crude soybean oil is much more expensive than palm oil.

Similarly, PVMA suggested reducing the custom duty on import of crude sunflower oil and crude canola seed oil from 15,000 tonnes to 10,550 tonnes. Justifying the demand, the PVMS stated that the availability of sunflower seed oil and canola seed oil in international markets and its subsequent imports in Pakistan was earlier non-existent. But due to ever-changing and newly emerging trading scenarios in the wake of US trade sanctions, Ukraine conflict etc both the commodities have now started trading and were available at a completive rates.

Therefore, it is time to rationalise custom duty applicable on them, which at present is comparatively much higher than other compatible edible oils such as soybean and palm oil. It will help the importers to have multiple choices for imports and better status/position to negotiate the prices with suppliers on equal terms, with no loss to national exchequer.