KARACHI: Producers have warned that the flooding of cheap smuggled Iranian cooking oil is not only affecting the market share of the local edible oil industry but also causing revenue losses to the exchequer.

A number of market players or middlemen, using social media platforms, have been offering Iranian cooking oil and canola oil at Rs240-325 per litre saying “the prices are negotiable” while the locally produced cooking oil is being sold between Rs380-400 per litre.

They have also shown their desire to sell the Iranian products in bulk to only small local producers of cooking oil. The demand for cheap Iranian oil has been growing in the last one month in Karachi and upcountry markets due to a high tax of Rs80 per kg or Rs80,000 per tonne on the import of edible oil in Pakistan.

The Pakistan Vanaspati Manufacturers Association (PVMA) through its Dec 17 letter had informed Finance Adviser Shaukat Tarin and Director General of the Pakistan Standard Quality Control Authority (PSQCA) Ali Bux Soomro that due to the high tax structure on import of edible oil, the cross-border smuggling through porous borders has been thriving.

PVMA Chairman Tariq Ullah Sufi and Senior Vice Chairman Sheikh Amjad Rasheed said that the dumping of Iranian oil is causing revenue loss to the national kitty but also hitting the sales of "Made in Pakistan” products in the domestic market. They said the smuggled goods are non-certified and substandard edible oil products, hence a threat to human health, therefore these products must be checked and stopped for keeping in stock and selling under the stipulations of PSQCA Act 1996 and rules framed there-under.

They called upon the provincial food authorities of Punjab, Sindh, Balochistan and Khyber Pakthtunkhwa to take notice of this issue of public interest.

The attractive profit margins, available to the implied undocumented and grey supply chain of smuggled goods, suggest that the illegal practice is liable to further flourish if left unattended, the PVMA said.

It is a universally accepted and experienced phenomenon that raw materials and finished goods on which incidence of duty/taxes and other levies are higher in comparison with the regional and neighboring countries are prone to smuggling and thus the local industry is witnessing the same scenario, the association added.

Unfortunately, the law enforcement agencies, tax offices, district administration and management authorities, besides other registering and licensing regulators are not paying any heed to the issue, hence the legitimate, documented and tax obedient industry is seriously suffering and sustaining irreparable financial losses by losing market share.

Mr Rasheed said the association has sought time from Finance Adviser Shaukat Tarin and the chairman FBR for taking any action against the influx of Iranian oil in order to save the local industry.

A ghee/cooking oil producer said since the Iranian product is not according to PSQSA standard then it could be injurious to human health.

He said the government should save the local industry which is already struggling due to rupee depreciation against the dollar, the current gas crisis, and high tariff on edible oil imports.

PVMA Secretary-General Umer Islam Khan said the low price of Iranian oil means that there is no tax or duty on the product while the Iranian government also provides subsidies.

On the government’s plan to reduce the general sales tax to 8.5pc from 17pc at import stage of palm oil and oil seeds and 50pc cut in customs duty on import of palm oil, he said “so far nothing has been done.”

He said Pakistan consumes 4.5 million tonnes of ghee and cooking oil annually. Import of palm oil (main raw material of making edible oil products) stands at three to 3.1m tonnes per annum. Besides, 3.2m tonnes of seeds are imported to extract 900,000 tonnes of canola and soyabean oil. The industry gets 400,000 tonnes of oil from cottonseed, rapeseed, canola seed, and corn.

Published in Dawn, December 26th, 2021