KARACHI, March 18: Encouraged by low tax rates on the import of crude palm oil (CPO), Pakistan’s leading edible oil buyers plan to set up four new refineries with a total capacity of 2,200 tons a day, industry officials said on Saturday.

The planned refineries, most of which will become operational by the end of 2007, will double the country’s CPO refining capacity, presently is at 2,025 tons a day.

“Tax advantage on the import of CPO for refineries is the main driving force behind setting up the plants,” said Waheed Sheikh, chief executive of Waheed Hafeez group, a trading venture with Singapore’s Wilmar Trading Pte.

Pakistan currently charges a fixed Rs9,550 per ton as a regulatory and customs duty on CPO imports, in addition to a 15 per cent sales tax. But refineries are allowed to import CPO at the rate of Rs9,000 per ton.

“Secondly, CPO is much cheaper than the olein and the price difference is $25 to $30 per ton,” Mr Sheikh said. “So making one-time investment in refinery is a good business proposition, which we have already seen in many countries, including India, in recent years.”

Waheed Hafeez group’s venture with Wilmar will end by June 2006, and it has planned to set up a plant with a European firm.

Mr Sheikh said the initial cost was estimated at Rs400 million ($6.647 million) and construction would start later this year.

At present, five refineries are operational in Pakistan, while the country’s biggest refinery of 1,000 tons per day by a leading edible oil trading house, West Bury Pvt Ltd, will become operational in April.

Two other local firms, Habib Oil Mills (Pvt) Ltd and Hamza Vegetable Oil and Ghee Mills, have also planned to set up plants.

Importers said new refineries would boost CPO imports.

“Our daily requirement of palm oil is around 4,300 tons and, with the setting up of new refineries, we will see a jump in CPO import in the next two or three years,” said Akbar Puri, chief executive of Karachi-based Agro Commodities.

Pakistan is the world’s fourth largest consumer of vegetable oils, with a domestic demand of 2.5 million tons, 90 per cent of which is covered by imports, mostly of Malaysian RBD palm oil and olein. Domestically produced cottonseed oil covers the rest.

According to government data, Pakistan spent $421 million on vegetable oil imports of 965,478 tons in the first seven months of fiscal 2005-06 (July-June), compared with $417 million for purchases of 844,627 tons in the same period last year.—Reuters