Edible oil manufacturers decline to reduce prices

ISLAMABAD: Despite a direction of the Federal Minister for Finance Shaukat Tarin to reduce the price of edible oil during the recent meeting with stakeholders, the ghee and oil manufacturers have shown their inability to reduce prices for, what they claim, high palm oil prices and the continuous depreciation of the rupee.

Following the reluctance shown by manufacturers the edible oil and ghee, rates are less likely to come down not only because of technical reasons but due to lack of regulatory oversight too, and the retailers were charging exorbitantly high prices.

The Pakistan Vanaspati Ghee and Oil Manufacturers Association (PVMA) has written a letter to the ministry of industries and the finance ministry that the ghee and edible oil rates cannot be reduced further, due to high palm oil prices and the continuous depreciation of the rupee.

However, the manufacturers have suggested that the government can help reduce the retail prices by reducing the new taxes imposed on ghee and oil sector in the budget 2021-22 and by implementing its regulatory authority at the retailers, who were selling ghee and oil at high prices.

The PVMA has highlighted that the international market closed at $1,225 per tonne on Friday, September 10, with an increase of around $50 against the previous month.

“Besides around $40 per tonne was incurred as freight charges etc, while the Pakistani currency has declined to around Rs168 against the dollar,” Sheikh Abdul Waheed, chairman PVMA, said while talking to the media here Saturday.

He added that the government promised to take back the additional duties imposed on the ghee and oil sector in the budget but that too has not been implemented.

An additional sales tax of 3 per cent was imposed on the sale of ghee and cooking oil to unregistered buyers including wholesalers and retailers, while there was 0.1 and 0.5pc withholding tax, along with input sales tax adjustment of up to 90pc has been allowed.

“Whereas the other option was to use administrative measures for slightly reducing the prices – as the current ex-factory price was Rs290 per kilogram for high-quality mills, and the retail price has to be Rs15 and Rs20 over the ex-factory- but it was so so.” Sheikh Waheed added.

The PVMA was strictly directed by finance minister Shaukat Tarin, last month to reduce the prices of branded and unbranded ghee/cooking oil prices to around Rs270-300 per kilogram, but it is currently in the range of Rs330 to Rs400 for different brands.

The PVMA maintains that the average monthly consumption of ghee and oils in Pakistan was around 400,000 tonnes, out of it 350,000 tonnes was produced in the organised sector mainly through the imported raw material, whereas the remaining demand is filled by locally-grown oil seeds and the unorganised sector.

The demand for palm oil and palm olein was increasing in the international market, as it has several applications including cooking, lubricants, candle-making, cosmetics and even for making biofuel.

Last month Shaukat Tarin had warned the manufacturers to rationalise domestic ghee/cooking oil prices in line with easing international vegetable oil markets.

During a meeting with a delegation of PVMA at his office, according to an official statement by the Ministry of Finance, Tarin had made it clear that the government would take all-out measures including flooding the market with imported edible fats if prices were not brought down in the domestic market.

There was a heated discussion on price range and the government circles stressed the branded and unbranded ghee/cooking oil prices must be reduced to around Rs270-300/kg in the domestic market for different branded products. The PVMA representatives argued the prices were linked to the international market as palm oil was being imported largely from Malaysia so it was not in their hands alone to bring down the prices.

The price of branded cooking oil of good quality currently ranges from Rs330/kg to Rs400/kg in the domestic market. According to an official statement, chairman PVMA briefed the finance minister about the hike in the international prices of palm and soybean oils particularly amid the ongoing Covid-19 pandemic.