Thursday December 02, 2021

Rs30 bn scam by mafia in ghee industry spotted

June 12, 2020

SLAMABAD: Amid the scams of huge swindling by mafias in sugar, flour, power and ongoing artificial shortage of petroleum products by oil marketing companies (OMCs) that severely hit 220 million countrymen, another scam of Rs30 billion in ghee industry has emerged on the scene which is spotted this time by the Ministry of Industry and Production (MoIP), an official document reveals.

According to the document managed from the MoIP dated June 08, vegetable ghee and oil industry has unlawfully fleeced huge amount of Rs30 billion from the consumers by not passing the reduction of Rs50 per kg to the end consumers at retail level which was due because of drastic cut in oil prices in international market. Palm oil is used to make ghee or edible oil as the main input.

The document mentions that despite reduction in prices of international palm oil from $789 per ton on January 02 to $512 per ton in May, the retail prices of vegetable ghee in the market have not shown declining trend, but there is insignificant reduction of Rs5 per kg in premium brands. However, as per the calculations of the MoIP, there should have been a reduction of at least Rs50 per kg in retail price of each brand on account of reduction in international palm oil prices. Similar is the case with reduction in diesel prices and corresponding reduction in transportation cost of vegetable ghee is not translated at retail level selling.

The Ministry of Industries and Production wrote four letters, the document said, in just one month of March to Pakistan Venaspati Manufacturers Association (PVMA), but the Association did not come up with any response even after the lapse of five months. Though the top officials of the Ministry of Industries and Production held a meeting on March 02, with PVMA delegation headed by its chairman and the ghee and edible oil industry representatives have given commitment to pass the benefit of reduction of international palm prices on to vegetables ghee consumers, but after five months, the prices have not been reduced. The MOIP wrote four letters to the PVMA, but it did not get any response.

The task to look into the wrongdoings in vegetable oil or ghee sector was assigned to the Ministry of Industries and Production by the prime minister on February 17. The ministry has completed its working according to which the ghee and edible oil consumers have been deprived from the due relief of Rs50 per kg by the mafia in the ghee industry. Now the ministry has asked the Competition Commission of Pakistan (CCP) to take action against the unscrupulous elements in ghee industry.

The calculations worked out by the MoIP explain that the freight on board (FOB) price of refined, bleach and deodorised (RBD) palm oil on January 02 was at $789 per ton and till May 12, and this price has dropped to $512 per ton with the decrease of $262 per ton during five months. This should have translated into vegetable ghee retail price reduction of Rs60 per kg at forex rate of $1: Rs155.

“If we keep the forex rate at $1: Rs165 which was the highest exchange rate during last 45 days, the impact of these Rs10 escalation (Rs165-155) worked out for reduction of Rs7.74 per kg in retail price of vegetable ghee for this forex rate escalation only. This means that there should have been vegetable ghee retail price reduction of Rs50 per kg in each brand,” the document of the MoIP unfolds.

Apart from that the costing models of PVMA add withholding taxes to the cost of ghee/edible oil which is not the liability of the consumers. In the meanwhile, the additional custom duty of 2 percent was also abolished in lieu of COVID-19 till June 30, 2020 vide SRO 288(1) 2020, dated April 7, 2020.

As per the document, a consumer in this regard has also forwarded a complaint through Wafaqi Mohtasib and Prime Minister’s Portal (No IS070520-7999757). Since the CCP has the mandate to intervene in such situations under Section 3(3) (a), 37 and other enabling provisions of the Competition Act 2010. So the MoIP forwarded to the CCP to take suo motu action as per the Section 37 of the Competition Act and penalise the mafia in ghee industry.