Pakistan Removes 2% Additional Import Duty on Edible Oil

Government of Pakistan has announced a multibillion-dollar economic package to support low income citizens and business sectors which are badly affected by the coronavirus related lockdown in the country.

The government reduced import duties of numerous goods, especially food items, to reduce the financial burden on consumers. Through an SRO dated April 7, 2020, the Federal Board of Revenue announced the removal of 2% ‘Additional Import Duty’ on the import of CPO, RBD palm olein, RBD palm oil and soybean oil with effect from April 7, 2020 until June 30, 2020.

Following is the existing applicable duty structure in Pakistan:

Particulars Custom Duty PKR/MT Regulatory Duty PKR/MT Additional Import Duty Central Excise Duty Income Tax Misc. Expenses
RBD Palm Oil 9,180 50 Exempted Till 30/6/2020   17%   5.5%   1.5%
RBD Palm Olein 7,692.50 50 Exempted Till 30/6/2020   17%   5.5%   1.5%
Crude Palm Oil 6,800 50 Exempted Till 30/6/2020   17%   5.5%   1.5%
Particulars Custom Duty PKR/MT Additional Import Duty Central Excise Duty Income Tax Misc. Expenses
CD Soybean Oil 10,550 Exempted Till 30/6/2020   17%   5.5%   1.5%

The wavier of 2% additional custom duty translates to a discount of PKR 1,000 per MT (USD 6) at the existing conversion rate. Unfortunately, this discount in the duty will not be able to lower the price of landed cost of edible oil in Pakistan as the Pakistani rupee lost 7.1% value in the last 4 weeks. Pakistani rupee which was being traded at 1 USD to 154 PKR on March 8, is currently valued at 1 USD to 166.5 PKR.

It is anticipated that the imports of palm oil in Pakistan will maintain its current level of 250,000 – 270,000 MT in the next two months of April and May, and this discount in the duty will help in boosting import levels for edible oil in the month of June.

The extended lockdown in Pakistan has threatened the livelihood of approximately 25% of the Pakistani population who are dependent on daily wages.  However, there has been an overwhelming drive for collecting and distributing ‘Monthly Food Ration’ for the financially disadvantaged, which has resulted in increased demand for ghee and oil, along with other dry food items. This demand has compensated for what was a lack in the usual Ramadan boost in sales generated through HORECA sector. The industry is also enjoying good margins on the processing and sales of ghee and cooking oil as they are now receiving palm oil deliveries at reduced prices.

The import of palm oil was expected to take a dip in the month of June due to the anticipated decline in demand post Ramadan and arrival of cottonseed oil from Sindh province. However, the industry is now hopeful that this momentum of increased demand and reduction in the import duty till the end of June will result in good volumes for palm oil in the second quarter as well.

Prepared by:  Faisal Iqbal

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.

You can share this posts: