KARACHI, Oct 11: Smuggled, fake and under-invoiced soaps are gradually increasing their share in the local markets for their prices being attractive. Most of the retail outlets display such products prominently, and the push-cart owners selling various brands and names at cheaper rates.

Lately, the Pakistani industries are facing stiff competition from such goods. Many local companies are now bound to use all pricing, marketing and selling measures in order to combat the competition from these smuggled products and to maintain their presence in the market.

“Smuggled and under-invoiced toilet soaps have captured 18-20 per cent market as compared to 10-15 per cent last year. The share of smuggled items is rising by five per cent every year,” Chairman, Pakistan Soap Manufacturers’ Association (PSMA), said.

An estimated 50,000-60,000 tons find its way into the local markets every year. Soap, manufactured in Turkey, Malaysia, the UAE, India, Indonesia, Korea, etc., is entering the Pakistani markets from the Iranian border.

In some cases, foreign branded soaps are priced at Rs10 as compared to Rs15 of the locally made, while a few could be bought at the locally manufactured price.

Besides, being stuffed with the smuggled product there are instances where local markets could be found inundated with fake soaps, as well. These carry local names, mainly from Faisalabad, with a price tag of Rs18 but it is retailed at Rs10. Its inferior quality is evident from the printing and fragrance.

The import of highly invoiced finished soap is disturbing our production and sales in the local markets and at the same time lowering the imports of raw materials, lamented the soap association chairman. Imports of tallow from Australia and the US has plunged to 59,641 tons in 2002 from 97,322 tons in 2001, while that of palm bye-products from Malaysia and Indonesia fell to 76,101 tons in 2002 from 82,797 tons in 2001.

Soap industry consists of 150 manufacturing units in the organized sector, while approximately 1,000 small or cottage factories are also involved in this business. The total laundry soap production in both the sectors is approximately 420,000 tons per year.

Though palm stearine is a better raw material than tallow but its rates normally remain lesser. But the government has imposed exaggerating custom duty when imported by the soap industry. The only industry of Pakistan, Oleo Chemical also uses the same raw material to primarily manufacture stearic acid for cosmetic industry which is an intermediately material. They have been provided a special concession on the import of palm stearine under the SRO 444(I) 2001 and have to pay only 10 per cent customs duty while for soap industry the duty is Rs9,500 per metric ton that comes to 43 per cent.

The palm stearine comes from Malaysia at cheaper rates than tallow from Australia, the US and the UK. If this anomaly is rectified its import from Malaysia will increase by 70,000 tons.

In order to bring down the cost of production and compete with the smuggled, fake, under-invoiced and imported soaps, there is a need to cut the customs duty of tallow to five per cent and other raw materials to 10 per cent, the PSMA chief said.

A multinational company imports finished soap at $1,100-1,200/ton and pays all taxes and duties while other importers are declaring only $450-700/ton to avoid the real duties and taxes. Soap noodles, also a finished product, is being imported from $150-250/ton while its import value must not be below $500-600/ton. The government is definitely loosing the revenues by 40-55 per cent.