20 June 2004	Sunday	01 Jamadi-ul-Awwal 1425

KARACHI, June 19: Widespread downward movement in prices of essential consumers goods have started following duty cut and reduction in withholding tax at import stage announced on June 12 , by the finance minister in the budget 2004-05, market sources said on Saturday.

In another development many L/Cs for the first time in the history of the country have been opened for import of almond and ceshewnut which hitherto remained smugglers items.

"It is consoling that for the first time in the history of this country those items which have been smugglers best choice are now going to be imported through official channels," a leading importer said.

The Federal Finance Minister in his budget 2004-05 proposals reduced import duty and withholding tax on large number of essential consumers goods, including spices, betelnut, dry fruits and tea ranging from 10 to 20 per cent. The duty cut on import of industrial raw materials have also showing its good impact on prices in the local market.

The positive impact of duty reduction could well be judged from the fact that almond and chestnut which were never imported through official channels are now being imported and a large number of L/Cs have already been opened, another importer said.

Both the items were either smuggled or made their way into the country through official channels but on 'mis-declaration,' but after duty reduction from 25 per cent to 5 per cent these commodities are no more smugglers best choice, he added.

However, market sources said that the real impact will start by end of July, as one full month would have gone by of the new fiscal (2004-05) when Sales Tax which has been uniformed at the rate of 15 per cent and the announced cut in withholding tax on most of imported goods from 6 per cent to 2 per cent will become part of the costing.

Talking to Dawn Pakistan Commodity Traders Association chairman Raees Ashraf Tarmohammad said that the rationalization of duty structure would not only bring in more revenue for the government but would also promote legal trade and discourage smuggling as well as mis-declaration.

He said that because of duty cut clove price has already started falling down and are being quoted at Rs10,200 per 40 kg against Rs10,900 per 40 kg before the budget. Similarly, he said black pepper prices have also come down to Rs3,900 per kg from Rs4,200 per kg prior to budget.

Raees Ashraf Tarmohammad further said that tea which have a wide range of qualities has also started showing lower prices. He said overall there is a fallbetween Rs40 to Rs60 per kg depending upon quality. He said that tea is being sold in the local market in price range of Rs80 to Rs200 per kg.

Once the prices stabilize and take their real base level under new duty structures, he said the benefit will be fully transferred to end consumer.

Similarly, he said the prices of industrial raw materials have also started falling after a duty cut announcement in the budget 2004-05. There was no reason that prices of industrial goods will not come down particularly when input cost of the industry will be lesser on paying reduced duties and taxes.

The reduced duty structure, he said will promote legal trade and also help genuine importers channelize most of the trade through official channels which will ensure higher revenue collection and proper monitoring of quality.

There was a time, Tarmohammad said, when Pakistan was known as a paradise for smugglers but now it seems the situation has changed and it could be easily stated that now Pakistan has become a graveyard for smugglers.