Cooking oil to become costly after around 30% rise in duty

Govt has allegedly taken the step on insistence of a Punjab-based minister

ISLAMABAD: After around 30% proposed increase in customs duty on the import of cooking oil, every household that consumes soybean oil and palm oil will pay an additional Rs5 per kg that will benefit the factories being run by relatives of a federal minister.

In the budget for fiscal year 2018-19, the Federal Board of Revenue (FBR) has proposed the increase in customs duty on the import of soybean oil and refined, bleached and deodorised (RBD) palm oil despite the fact that the country meets almost three-fourths of its needs through imports.

According to the proposal, the customs duty on soybean oil will be increased from Rs9,050 to Rs12,000 per ton, up Rs2,950 or 32.6%. Furthermore, the duty on palm oil will be raised from Rs10,200 to Rs13,200 per ton, an additional burden of Rs3,000 or 29.5%.

FBR sources revealed that the revenue board took that budgetary measure on the insistence of a Punjab-based federal minister. The minister belongs to Sheikhupura district and his relatives run solvency and extraction plants.

Neither the FBR chairman nor the FBR spokesman was available for comments.

However, sources in the FBR said the government had started facing pressure and it may consider reversing the duty increase. Final decision will be taken by the political leadership due to the involvement of the senior PML-N leader. Industry players called the increase in customs duty on cooking oil illogical and the FBR was also against the move.

With this upward revision, imports of soybean oil and palm oil could be affected. Industry people apprehended that if the government did not reverse the move, the cost of cooking oil would go up by about Rs5 per kg, putting burden on ordinary consumers.

Edible oil imports meet around 75% of Pakistan’s needs. The rest is met through locally produced banola and mustard oil. Pakistan imports crude and refined cooking oil - palm oil and palm olein - mainly from Malaysia and Indonesia and brings soybean oil from North America and Brazil.

The consumption of soybean oil has been on the rise for the past few years due to health benefits. Oil obtained from its seeds is in great demand around the world.

Soybean oil has an imperceptible odour support which enhances natural flavour of prepared food. It is usually used for cooking, salad dressing, vegetable oil, margarine, and shortening purposes.

The current import price of soybean oil is around $790 per ton. With the increase in duty, the cost will go up to Rs131,637 per ton despite international soybean oil prices being currently at a one-year low.

However, the government’s budget move will push up the local soybean oil prices by a minimum of Rs4,000 per ton after the budget, according to an importers’ lobby.

They claimed that domestic prices had already started moving up from Rs127,263 per ton to Rs130,612 per ton. Even after higher rates of local soybean oil, they are still lower than international oil prices with the new duty structure.

The upward revision in the duty structure will only benefit the domestic solvent industry and major beneficiaries will be the relatives of a federal minister, claimed the importers’ lobby. The consumers will face higher prices for processed edible oil, which will go up by around Rs5 per kg. Already depreciation of the rupee a couple of times over the past four months has pushed up prices of edible oil products by Rs8 per kg.

Published in The Express Tribune, May 3^rd, 2018.

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