Pakistan backtracks on palm oil import taxes reduction

The government of Pakistan has withdrawn its decision to reduce import duties and taxes of palm oil as previously announced amid signs that a lack of response from the industry has stoked government frustrations, local media reports have indicated.

The Minister for Planning and Development, Asad Umar, had previously announced that the government was seeking to reduce vegetable oil taxes to 8.5% from 17% on October 18, with the aim of keeping a lid on domestic vegetable oil prices.

But reports indicate that vegetable oil importers were yet to receive official notifications from the Federal Board of Revenue (FBR) on the reduced vegetable oil duties, and the government is reluctant to push measures further without seeing a commitment from the industry to cut its prices.

“Pakistan’s decision to withdraw plans to cut vegetable oil taxes may not have much impact at their markets, but it could dent some demand as it is unfavourable for palm oil origins,” Anilkumar Bagani, research head at Mumbai-based vegetable oil broker Sunvin Group, told Agricensus.

The governtment's u-turn comes amid high raw materials for palm oil at origin coupled with high freight costs.

"There is no benefit for end consumers and the local market [from an import tax cut]...so the government will save the revenue instead," Abdul Hameed, director of sales at Pakistan-based Manzoor Trading Co, said to Agricensus.

Pakistan is the fourth-largest importer of palm oil globally, and it is forecast to import 3.6 million mt of the oil in 2021/22, a rise of 11% on the previous season, according to the USDA.