Thousands of tons of cooking oil, ghee being smuggled from Iran

ISLAMABAD: Thousands of tons of cooking oil/ghee are being smuggled from Iran in different cans of 5 to 20 kilograms, causing heavy losses to the country's formal sector and national exchequer, which runs into billions of rupees.

The formal sector of ghee/cooking oil complained that the government also provided massive exemptions of GST and income tax to the industrial ghee/cooking oil units located in erstwhile FATA/PATA areas through the Finance Act 2021-22.

As such, these units paid close to Rs7,000 per ton customs duty while other units located in the settled areas were paying Rs32,000 ton on raw material. So the units located in settled areas were facing disadvantageous position.

This issue was raised during the National Price Monitoring Committee (NPMC) under the chairmanship of Minister for Finance Shaukat Tarin but so far, no solution could be found so far.

There has been one proposal floated in the NPMC meeting that the input adjustment should be introduced, so that all units could claim refunds but there was no clear-cut decision yet. The industry sources said that sofar 250,000 tons raw material were being imported by the units located in the FATA/PATA areas for meeting consumption requirement of just 5 million population.

On the issue of smuggling from Iran, the industry sources said that total consumption of cooking oil/ghee stands approximately to the tune of 350,000 tons all over Pakistan, including 125,000 tons cooking oil and 225,000 tons ghee on per month basis. The industry sources said that 500 tons to 1,000 tons was being smuggled from Iran on daily basis, causing billions of rupees losses to the national exchequer.

The official sources said that both the land and sea were being used to smuggle goods, especially cooking oil from Iran these days, and there was an incentive for smuggling because the cooking oil and ghee prices had escalated in the domestic market in the wake of higher palm oil prices in the international market. The palm oil prices almost doubled in international market jacking up from $700 per ton to $1,400 per ton and there was no possibility that its prices would come down in international market because in Malaysia the employees working on palm oil fields were not available owing to Covid-19 restrictions. The industry sources said that the government did not bring down the General Sales Tax (GST) on import of palm oil from 17 to zero percent and abolishing 2 percent Customs Duty despite making commitments publicly. Now it seemed that the smuggling was allowed rampantly so that the domestic prices could be shown reduced.

When contacted, Executive Member of Pakistan Vanaspati Manufacturers Association (PVMA) Umar Rehan said that the cooking oil/ghee was being smuggled from Iran through Balochistan in thousands of tons and even some social media platforms were advertising different brands openly but there was no action on the part of the government. He said that the Iranian cooking oil was being dumped at cheaper rates and it was even available online in Pakistan. He said that the formal sector was facing huge losses because it was importing palm oil by paying taxes and making products but this Iranian cooking oil had obtained market share in the range of 10 to 15 percent.

When contacted, one FBR official told The News that the FBR took strict enforcement measures and there was not rampant smuggling of cooking oil coming from Iran in bulk quantity. However, the FBR’s official spokesman did not give reply to questions till the filing of this report on Wednesday.