ISLAMABAD: Amid rising prices, the government has approved the removal of additional customs duty on import of palm oil and related products for about a month in an attempt to contain edible oil and ghee prices.
The Economic Coordination Committee of the cabinet has cleared a summary of the Ministry of Finance that is expected to be formally ratified by the federal cabinet this week before a formal notification for removal of 2 per cent additional customs duty (ACD) on crude palm oil, palm stearin, RBD Palm Oil and RBD Palm Olein until June 20.
The 2pc additional customs duty on import of all these products from Indonesia would remain in place. The edible oil and ghee prices have witnessed more than 300pc increase in prices in about 6-8 months.
Under the National Tariff Policy 2019-24 (NTP), all proposals for levy, amendment or removal of tariffs has to be examined at the Tariff Policy Centre and after approval by the Tariff Policy Board, is to be presented to the Federal Cabinet or Parliament, as the case may be, for consideration and approval.
The Ministry of Commerce had told the ECC that the government of Indonesia had unilaterally decided to impose ban on the export of palm oil since April 28 because of rising prices in its own market, but the ban created supply uncertainties. Pakistan is dependent on palm oil from Indonesia as it normally imports more than 85pc of the commodity from Indonesia.
Indonesia lifted the ban on export of palm oil on May 23, but at the same time they have imposed a condition that exporters would also need to ensure 33pc supply to domestic market in Indonesia and obtain an export permit. These conditions are resulting in delays in shipment of palm oil from Indonesia.
The other country from where palm oil can be imported is Malaysia, where prices are relatively higher than Indonesia due to lower production. It may be noted that concessionary tariff for palm oil is being applied to Indonesia and Malaysia under their respective free trade or preferential trade agreements (FTA/PTA).
At present, the normal duty rate on import of crude palm oil is Rs8,000 per ton while its import under FTA/PTA from Indonesia and Malaysia is Rs6,800 per ton. In both cases, import is then subject to 2pc ACD, 2pc withholding tax and 17pc general sales tax. Likewise, palm stearin and RBD palm olein are subject to Rs9,050 normal customs duty or Rs7692 per ton in case of imports under FTA/PTA besides 2pc ACD and WHT each and 17pc GST.
Also, RBD palm oil attracts Rs10,800 per ton of normal import duty compared to Rs9,180 per ton duty under PTA/FTA. This also attracts 2pc ACD and WHT each besides 17pc GST.
The business community had approached the Ministry of Commerce with proposal for reduction of duties to mitigate the current situation and ensure sufficient stocks of edible palm oil, by extending certain duty advantage to import from Malaysia under Free Trade Agreement (FTA).
The Ministry of Industries and Production also proposed grant of concessionary tariff relief to facilitate import of palm oil from sources other than Indonesia on immediate basis.
The Ministry of Commerce contended that the issue of rising prices of edible oil in Pakistan and disruptions in the supply
line were being regularly discussed in the meetings of the PM task force on supply of palm oil.
The Ministry of Commerce has taken steps to mobilise the trade and investment officers in Indonesia and Malaysia to follow up with the host governments for securing the orders for importers in Pakistan.
Therefore, the ECC has cleared the proposal remove the 2pc Additional Customs Duties on import of palm oil (including crude palm oil, palm stearin, RBD palm oil and RBD palm olein) for shipments originating from all sources other than Indonesia that reach Pakistan by June 20, to encourage
importers to bring palm oil into Pakistan at the earliest.
It was, at the same time, also pointed out that such discriminatory interventions against the principle of equal treatment were not in conformity to World Trade Organisation (WTO) rules, but the unilateral export ban imposed by Indonesia in violation of WTO rules, may result in shortage of palm oil in mid-June 2022 if import from alternative sources are not made immediately.
In view of this force majeure situation, a temporary tariff relief measure has been adopted to mitigate the cost differential of importing palm oil from sources other than Indonesia. Because of the urgency of the matter amid depleting supplies in the country and absence of the minister for commerce, the ECC directly took up the matter for policy action by sidestepping the formality of its prior approval from the tariff policy board.
Published in Dawn, May 30th, 2022