According to the proposals of local ghee and cooking oil industry submitted to the finance minister and Federal Board of Revenue (FBR) here on Friday, after enhancement of customs duty on soybean oil the imports dwindled to 122,475 M Tonnes in calendar year 2018 as compared to 221,150 M Tonnes in calendar year 2017 i.e. a negative change of over 44.62%. On the flipside the soybeans import was pegged at 1,847,603 M Tonnes and 2,326,107 in calendar years 2017 and 2018 respectively i.e. an upward trend by almost 26%. The said figures in itself justifies that raising the undue customs duty on soybean oil was totally unjustified/un-necessary, aimed at facilitating the import of soybeans by disturbing the fair competition and imposing tariff barrier on soybean oil.
The reduced rate of duty/tax structure applicable on import of soybeans is Custom Duty @ 5%, Sales Tax @ 6% and WHT @ 5.5% adjustable, whereas on soybean oil it is very high to the tune of 16% FED, Rs 10,500 Custom Duty and 5.5% WHT non-adjustable. However, rate of fixed FED in value addition mode and additional customs duty on both commodities are same @ Rs 1,000/Rs 400 and 2% respectively.
For the purpose of ease of understanding the incidence of duty/taxes on each tonne of soybean oil (imported) and oil extracted from imported soybeans is as follows: soybean seed imports, 2.3 million M Tonnes; soybean oil extracted from imported oil seeds, 418,700 M Tonnes; tax incidence on 1 tonne of soybean Oil extracted from 5.15 M Tonnes of beans (oil content @ 18%), Rs 7,800 or USD 56; tax incidence on 1 tonne of imported soybean oil, Rs 36,013 or USD 261; concession granted to soybean oil extracted from beans, Rs 28,213 or USD 204; total tax concession on 418,700 M Tonnes of soybean oil extracted from beans, Rs 11,812,783,000 or USD 86 million; costing of oil extracted from imported beans per M Tonne (inclusive of duty & taxes), Rs 72,080 or USD 522; costing of imported soybean oil per M Tonne (inclusive of duty & taxes), Rs 139,513 or USD 1,011 and premium enjoyed by soybean oil extracted from beans, Rs 67,433 or USD 489.
As far as sale price of soy meal is concerned, it is now trading @ Rs 55/kg or Rs 55,000/M Tonne inclusive of 10% sales tax applicable on leftover quantity of beans after extracting soy oil (18%). In this accounting/costing backdrop, it is lethal for foreign exchange reserves and national revenue either to further raise customs duty on import of soybean oil or granting exemption of sales tax on local sale of soybean meal as proposed by APSEA. Rather it would be appropriate to reverse customs duty on soybean oil back to Rs 9,050/M Tonne.
The additional benefit of adjustable WHT @ 5.5% exclusively granted to Solvent Extraction Industry is draining the national exchequer to the extent of Rs 4.46 billion per annum.
Due to above stated anomalies and unprecedented tax benefits granted on importing oilseeds, the local oilseed crop acreage is witnessing downward trend. Resultantly edible oil extracted from local crop was 573,000 M Tonnes in 2014 dived to bottom of 450,000 M Tonnes in year 2017 and in year 2018 pegged at 503,000 M Tonnes only.
If the concessions/subsidy granted to import oilseeds is diverted to local farmers, Pakistan can conveniently become self-sufficient in oilseed crop and huge foreign exchange reserve to the extent of USD 1.4 billion per annum can be saved, thus improving the painful and ever mounting trade imbalance as well.
The industry would appreciate, if due consideration may be granted to its proposals only in larger national interest. Moreover reversing the customs duty may also result in reduction of cooking oil price by minimum Rs 3 to 4 per litre, which obviously is in public interest, added the ghee and cooking oil industry.