Govt urged to stabilise ghee, vegetable oil prices

Published January 14, 2021
Branded and unbranded ghee and cooking oil available in small and large packs and pouches at a retail shop in Karachi. — White Star/File
Branded and unbranded ghee and cooking oil available in small and large packs and pouches at a retail shop in Karachi. — White Star/File

ISLAMABAD: As vegetable oil and ghee rates remain volatile, mainly moving upwards, the stakeholders in the sector have demanded that the government revise duty structures to help maintain prices in the local market.

The Pakistan Vanaspati Manufacturers Association (PVMA) in a presentation sent to the ministry of industries on Wednesday informed the government that the price of processed ‘refined, bleached and deodorised’ (RBD) palm oil issued from Singapore was $787 per tonne at the start of 2020, it dropped to $512 per tonne in the first week of May 2020, but with supplies running short, it jumped to $750 in the first week of November 2020 and surged to $1,050 per tonne last week.

Highlighting duties and taxes on palm oil at the Singapore market rate of $1,050 per tonne, it said the fixed customs duty was Rs7,692 per tonne, besides an additional customs duty of 2 per cent, Pakistan Oilseed Development Board (PODB) cess of Rs50, federal excise duty of 17pc and 2pc withholding tax.

The PVMA in the letter also gave the detailed cost of other expenditures including freight charges, insurance, port charges and warehouse surcharge at ports.

PVMA wants duty structures rationalised

As the international supplies may remain unable to cater to the rising demand of ghee and oil during Ramazan, which is set to commence in the mid of April, the retailers fear that the volatile prices are likely to lead to higher use of substandard ghee and oils mainly by the cooked food sale points in the holy month.

To devise a strategy for a short-term solution for the issue, another meeting between PVMA and Minister for Industries and Production Hammad Azhar is expected in the coming days.

The vegetable oil and ghee manufacturers have demanded the government rationalise the duties and taxes of the whole supply chain to maintain smooth supplies at reasonable cost.

“We have told the authorities that the next palm oil harvest in Malaysia and Indonesia will be in March and April, therefore the palm and palmolein oil supplies will improve after mid of March,” PVMA chairman Sheikh Abdul Waheed said.

Currently, he said, there was extreme shortage of palm oil due to Covid-19 and political crises between Malaysia and India last year. “The Malaysian support to the Pakistani stance over Kashmir in late 2019 led to massive decline in palm oil purchases by India in 2020, at the same time the severe threats of Covid-19 reduced harvesting of palm fruit during the year,” he said.

“As a result of India taking a back-foot, the Chinese companies have entered the palm oil processing market. Later, India resumed purchases from Malaysia and as demand was high from all sides there was no stock left there.”

Karachi Retail Grocers Group General Secretary Farid Qureshi said: “With prices moving upwards many consumers seek cheaper options.”

He said: “The problem with most of retailers was that buying any such product showing price volatility is risky, and as for the ghee and oils it was one of the most heavily consumed items in our society.”

The average retail rate of loose ghee and oil was around Rs280 per kilogram/ litre but the suppliers have already intimated that the next batch would be even costlier. “Similarly the average wholesale price of branded item is set to rise to Rs306 per kg/litre, therefore the retail rates would be between Rs5 and 10 higher,” Mr Qureshi added.

The annual ghee and oil consumption in Pakistan up is to five million tonnes, whereas the share of informal sector such as desi ghee, mustard oil etc is around 400,000 tonnes. However, ghee and oils up to 300,000 tonnes is consumed mostly through food industry that is made from substandard and non-edible category raw material.

Published in Dawn, January 14th, 2021

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