in

Govt Offers Incentives to Ghee & Cooking Oil Industry For Reducing Prices

The government has offered the ghee and cooking oil industry to reduce prices of ghee and cooking oil to avail reduction in duties and taxes including abolition of 2 percent additional customs duty (ADC) and withdrawal of restriction on 100 percent input tax adjustment.

A senior official in the Ministry of Industries & Production told ProPakistani that Federal Minister for Industries & Production, Muhammad Hammad Azhar held a meeting with the ghee and cooking oil industry on Friday at the Ministry.

Muhammad Hammad Azhar stresed the need for reducing the prices of the ghee and cooking oil to provide maximum relief to the general public. However, industry gave a detailed presentation to the Minister to highlight the factors responsible behind the increase in prices of the commodity.

It has been decided to convene another meeting with the Minister next week to work out the modalities for possible reduction in the prices of ghee and cooking oil after some concessions in the tax regime applicable for this industry.

Industry recommended the Minister that the vegetable ghee and cooking oil are included in the list of staple food items, therefore, being a food item of poor and middle class tax structure on it needs to be slashed heavily such as conversion of Custom Duty into Regulatory Duty and abolishment of Additional Custom Duty. The Sales Tax in Value Addition Mode may be reverted back to the previous regime of Re. 1/kg fixed (Full and Final).

Minister was informed that the ghee and cooking oil market in Pakistan is one of most fragmented and highly competitive one. There are more than 131 manufacturers and importers competing in the market.

The competition is so intense that no onem manufacturer has more than 3% market share. Thus there is no dominant player or monopoly situation. Amid Covid-19 outbreak 1st wave (Mar-Aug 2020) the world commodities market crashed and world faced unprecedented recession with no sign of recovery. These were extraordinary circumstances to the limits, consequently the importers and manufacturers bore huge losses.

There was a high time for edible oil sector & government to take extraordinary measures to curtail losses, which (the losses) industry was bearing in the months of Jan-May 2020.

At present the raw material (RBD Palm Oil) prices has surged to 8 year high of US$960 on C & F basis resulting into hike of Banaspati Ghee & Cooking Oil prices. The trend is likely to continue and consumer may witness even higher prices.

The lowest possible claimed rate of Ghee per kg available in market is through Utility Stores Corporation (USC) a subsidiary of Ministry of Industries. The USC buys ghee in bulk (a lot of 15,000 – 20,000 M.Tons inviting quotations by open tenders) after very stringent negotiations.

The retail price also does not include margins of Distributors, Whole Sellers and Retailers. The USC is also granted with exemption in Income Tax/Turnover Tax and reportedly exclusion from many other levies and overheads, besides enjoying economy of scales.

These prices are available with MOI&P for comparison with prices in open market.

The price of RBD Palm Oil fluctuates in international market, it is unpredictable and depends solely on international market forces i.e. demand and supply.

The prices of RBD Palm Oil slipped from US$787/M.Ton as on 1st Jan, 2020 to US$512/M.Ton as on 6th May, 2020 incurring huge losses to importers/manufacturers. The prices then again spiked gradually from US$512/M.Ton as on 12th May, 2020 to US$930/M.Ton as on 7th Dec, 2020 i.e. a change of US$418/M.Ton.

The additional factors resulted in escalation of prices revealed that earlier the incidence of sales tax was Re. 1/kg as final discharge of liability, which through Finance Bill 2019-20 has been increased up to Rs. 10-12/kg for premium brands and Rs. 4-5/kg for popular/economy brands.

The US$ to PKR parity rate escalated from Rs. 154 to Rs. 168 and then dropped to the present level of Rs. 160. The transporters refused to extend the full benefit of reduction in HSD prices.

Only high end brands with the market share of only 10% are selling their products over Rs. 260/kg due to their exclusive costing strategy, which they revise on quarterly basis.

Rest 90% brands (mid range and economy) are available in the range of Rs. 220-230 (mid range) and 200-210 (economy) respectively

Source from :

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

    Doctors and Staff Save Dozens of Critical Corona Patients by Putting Their Own Lives as Risk

    Italian researchers just made a startling coronavirus discovery