The Pakistan Poultry Association is piqued by the government’s decision to levy 5pc customs duty on all imported items used in poultry and cattle feed manufacturing along with 5pc sales tax on soybean meal.

The association has warned the government that the move would push up the cost of production of not only poultry products but also of beef and mutton and their sale prices.

Regardless of whether the government accepts their demand for the withdrawal of the customs duty and sales tax, officials say underlying realities remain unchanged. “The reality is that poultry and cattle feed industry has progressed well in the past few years and earned enough money. Taxing them a bit is not so harsh,” argues an FBR official reached by Dawn over telephone in Islamabad. “Also keep in mind that in order to promote the use of local ingredients in poultry and cattle feed manufacturing, taxing imported stuff is no nonsense at all.”

According to a Karachi-based poultry farmer who stopped poultry birds breeding some years ago and ventured into poultry feed manufacturing “despite levy of customs duty and sales tax on soybean meal” the business would continue to thrive due to rising demand. He, however, added a political tinge in his analysis of the situation by adding that if the duty and sales tax are removed “it will be done to benefit some politically powerful people. Some PML (N) stalwarts, including a junior Sharif, are in this business.”

Poultry farmers say even if there is some rationale for levy of duty and sales tax on soybean meal, the timing is so bad it will really hit them hard, referring to a rising trend in the international prices

Some business leaders point out that the import duty on poultry feed and duty plus sales tax on soybean meal would push up the landed cost of soybean meal at a time when its international price has been on the rise.

The FOB price of soybean meal, the main ingredient of poultry feed, shot up from $474 per tonne at end-January to $543 per tonne at end-May, a Karachi-based importer told Dawn. The president of Rawalpindi Chamber of Commerce and Industry Dr Shimail Daud claims the C&F price is currently hovering around $700 per tonne. In a recent press statement he too has demanded withdrawal of additional duty and taxes on soybean meal imports.

Poultry farmers say even if there is some rationale for levy of duty and sales tax on soybean meal, the timing is bad as it would really hit poultry farmers hard, referring to a rising trend in its prices.

Poultry feed makers say higher production of soybean oilseeds in the country over the past few years has improved availability of soybean meal locally and encouraged its use in manufacturing of poultry feed. So, for them, containing imports of soybean meal through import duties makes perfect sense, for it is in their interest. But they are very few in number and they meet just a portion of total demand for poultry feed.

Poultry sector’s productivity has been increasing steadily over past few years — thanks to local investment in poultry sheds, better breeding technologies and sufficient availability of fine-quality poultry feed. According to the Economic Survey of Pakistan, commercial poultry meat production went up from 44.1 million tonnes in FY12 to 47 million tonnes in FY13 and to 51.1 million tonnes in FY14. Production of commercial poultry eggs likewise rose from 9.281 billion to 9.912 billion to 10.586 billion during this period.

Building upon this growth momentum requires an enabling environment. Poultry trade leaders say an attempt to tax poultry feed is one big negative towards creating that environment. But some of them admit that rising demand in an expanding domestic economy and opportunities for exports of value-added poultry products and increasing investment by cash-rich poultry farmers in technological innovations continue to support poultry industry’s growth.

However, the core issue is competitiveness, inquiries made with poultry farmers and government officials reveal. Poultry farmers complain that their demand to impose a higher custom duty on import of chicken has been ignored to benefit some processed chicken selling companies fast food retail outlets. “What’s the logic behind keeping custom duty on imports of chicken just at 25 per cent at a time when we are producing more and more poultry birds every year,” questions an official of Pakistan Poultry Association, adding that in India the rate of import duty on chicken is 100 per cent.

Despite some investment in controlled-environment sheds, poultry feed manufacturing and disease-controlling vaccines for poultry birds after the super floods of 2010, actual output of value-added chicken products account for no more than one per cent. “If the government has not disturbed the status quo on imports of healthier semi-processed chicken that is because it wants the local industry to compete in value-added segment,” an FBR official told Dawn without confirming or denying whether import duty remains intact.

Published in Dawn, Economic & Business, June 16th, 2014