LAHORE, March 1: Pakistan can save millions of dollars by encouraging import of soft oils instead of importing oilseeds for local extraction to support solvent extraction units, say importers and ghee producers.

Speaking to Dawnhere on Friday, the oil importers said: “Local extraction of edible oil from (different) imported oilseeds costs the country some $575-650 per ton of (soft) oil that is currently priced at $360 in world markets (if imported in the extracted form)”.

The reason for this loss of foreign exchange, they say, is the “flawed duty structure” which heavily favours import of oilseeds, nearly doubling the country’s oil import bill, over soft oils.

The importers say the government charges accumulative taxes of Rs16,500 per ton on the import of “refined, bleached, deodarized” (RBD) palm oil and Rs14,500 on soft oils. As opposed to this, the government charges only five per cent duty —- or Rs750 —- per ton on the imported oilseeds.

What makes the locally extracted soft oils far more “expensive than the world markets” is the low quantity of oil extracted from one ton of seeds. The experts claim that it requires 2.50 tons of oilseed to extract one ton of oil. Thus the actual import duty on one ton of locally extracted oil comes to be about Rs1,875, which means the government is also losing huge revenue as a consequence of its flawed oil import policy, the importers allege.

The concession on the import of oilseeds for local extraction, the Central Board of Revenue officials say, is allowed to support about 50 local solvent extraction units that were facing a crisis as result of the low production of oilseeds in the country. It is said the local oilseed production meets only three-month needs of these units. The import of oilseeds helps these units continue to operate all the year round.

But it is interesting to note here that only 5-6 solvent units are operating at present notwithstanding the fact that the tax or duty concessions were given about two years back.

The oil importers also claim that “low-cost import of oilseeds has also hit the government efforts to encourage local production of seeds”. They say the “solvent units are not much interested in the local seed because it costs them Rs600-650 per maund compared to the very low price of Rs450 of imported oilseeds”. However, it may be mentioned that a few extractors have promised growers of sunflower and canola to pay Rs640/maund for their next crop.

The edible oil producers say duty on health-friendly soft oils be brought down to the level of duty charged on imported oilseeds or that on seeds be raised to the level of imported oils to provide level playing field to all players.

Muhammad Saeed, a manufacturer, asserts it is quite logical to encourage the import of soft oils which are cheaper than imported oilseeds and health-friendly by rationalizing the duty regime.

He says although the government charges an accumulative tax of Rs14,500-14,700 per ton on the import of soft oils as compared to Rs16,500 on RBD palm oil (at$320 per ton import price), the “fact of the matter is that the difference is nullified due to expenses the producers have to bear on their hydrogenation to convert them into ghee (suitable for human consumption)”.