July 9, 2003	Wednesday	Jumadi-ul-Awwal 8,1424

KARACHI, July 8: Smuggled and under-invoiced soaps have virtually captured the local markets for being cheaper in prices, thus giving a tough time to the local industry.

“The local industry is losing its sales and production, and if the smuggling continues the industry will collapse,” said Pakistan Soap Manufacturers Association (PSMA) chairman M. Yaqub Karim at a press conference here on Tuesday.

Soaps as well as detergents made in Turkey, the UAE, Malaysia and Indonesia are being smuggled into the country via Iran border, he said, adding that a random market survey revealed that local markets were flooded with around 36 different brands of soaps smuggled from 17 countries.

An estimated 7,500 tons of soap and 2,500 tons of soap noodles find their way into the markets every year, thus eroding the share of local industry, he said.

The PSMA chief blamed the law enforcement agencies for the smuggling. The government, he said, was losing around $500 per ton in shape of duties and taxes because of 10,000 tons of smuggled and under-invoiced soaps and detergents.

Pakistan soap industry comprises 650 units — 150 in formal and 500 in informal sector. The industry contributes Rs1.6 billion to the national kitty.

Mr Yaqub said there was 25 per cent customs duty on import of finished soap, while the duty on raw materials used in making soap ranged between 34 and 48 per cent, which was a clear cut case of anomaly. There must be sufficient cushion of the rate of customs duty between raw materials and finished products.

He said imported soaps were freely sold in local markets at cheaper price but the government agencies were watching the situations from the sidelines.

Soap and soap noodles are being imported at highly under- invoiced value to avoid customs duties and taxes. He said a multinational company imported finished soap at $1,100-1,200 per tons and paid all taxes and duties, while importers are declaring only $450-700 per ton to avoid duties and taxes.

Soap noodles are being imported at $150-300 per ton, while its import value must not be below $500-600 per ton. The PSMA chief said the government was loosing 40-55 per cent of revenue.

He said the WTO also recommended reasonable cushion between finished products and raw materials. He urged the government to cut the customs duty of tallow to five per cent and other raw materials to 10 per cent in order bring down the cost of production and enable the industry to compete with smuggled, imported and under-invoiced goods.

Palm stearine is one of the basic raw materials used in making good quality soap. Single oleo chemical industry in Pakistan, also uses the same raw material Smuggled soaps to make stearic acid for cosmetic industry. The industry has been provided with a special concession on the import of palm stearine.

Oleo Chemical has to pay only 10 per cent import duty, while soap industry has to pay Rs9,500 per ton, therefore, they have started making fatty acid from palm stearine and selling it to soap industry. All the soap units have same manufacturing facilities. They convert palm stearine into fatty acid and then soap.

In reply to a query over free trade with India, he said the industry did not feel threatened as Pakistani soaps enjoyed an edge over Indian soaps due to high quality. However, in detergents Indian product is far better than Pakistani product.