MULTAN, Sept 20: Imposition of 15 per cent GST on cotton seed oil (CSO) this year has hit hard the farming community as the prices of phutti (seed cotton) are sliding downward since its arrival from the fresh crop.

As a budgetary measure the federal government had withdrawn 15 per cent GST on cotton lint this year but later it on the CSO without giving a thought that its prices have a direct link with prices of phutti. Higher the CSO price, higher will be the price of phutti and vice versa.

Phutti consists of two components-lint and oilseed. In a given quantity of phutti, two-third will be oilseed while the remaining one-third will be lint. The ginners keep in mind prices of both lint and CSO while paying the growers against their produce.

Last year, the prices of CSO had steeply increased from Rs360 per 40kg at the beginning of season to Rs460 per 40kg at the peak time of cotton arrival from farms to the ginneries and, therefore, the prices of phutti had also shot up to Rs1400 per 40kg from Rs1000 per 40kg.

This year, the cotton season opened with a CSO price of Rs410 per 40kg and subsequent phutti price of Rs1000 per 40kg. During the last fortnight, the prices of CSO have come down to Rs340 per 40kg and consequently the prices of phutti have also been gone down to fluctuate around the official procurement price of Rs925 per 40kg, the price level which will warrant intervention of Trading Corporation of Pakistan.

The GST is imposed only on the CSO among all the indigenous sources of edible oil including sunflower, canola and rapeseed. A senior CBR official justified the GST on CSO saying it was a by-product of cotton crop while the other sources of edible oil were specifically grown to extract oil.

Most of the oil expellers in cotton belt of both Punjab and Sindh have reportedly stopped procurement of cotton seed from ginners as the ghee mills are not inclined to pay them a CSO price inclusive of GST.