Vanaspati Mills in Pakistan Threaten Shutdown Over Tax Discrepancy

Pakistan Vanaspati Manufacturer’s Association (PVMA) have announced a major protest against the government’s decision to retain the FATA-PATA tax scheme in the 2024 budget. If the scheme remains, they plan to shut down all ghee and oil factories nationwide from July 1.

Currently, vanaspati and oil factories across Pakistan pay a tax of Rs 85 per kilogram, whereas the 26 factories in FATA-PATA are only taxed at Rs 15 per kilogram. This disparity has led the Pakistan Vanaspati Manufacturers Association (PVMA) to declare that they will challenge the government’s decision in the Supreme Court and simultaneously initiate a strike.

PVMA Chairman, Abdul Razzaq, stated, “We will engage in both legal battles and strikes. If the budget is passed as is, the price of ghee per kilogram will increase by Rs 10 to Rs 12.” He further added that 156 ghee mills are currently operational across the country, but half of them have already shut down due to the advantages given to FATA-PATA.

The association emphasized that the current Finance Minister appears powerless against these influential forces. Abdul Razzaq pointed out that while the country imports 3 million tons of edible oil, FATA-PATA alone imports 353,000 tons. This tax-free oil is then sold in the rest of the country, creating an unfair market.

Former PVMA Chairman, Umar Rehan Sheikh, echoed these concerns, stating that the tax-free status of FATA-PATA’s oil and ghee significantly disrupts the market.

Pakistan Vanaspati Manufacturer’s Association (PVMA) raised in 1961 with 7 members on board, at present PVMA represents 137 Manufacturers of Vegetable Ghee, Cooking Oil and allied products. Catering for the national consumption, the industry manufactures 3.6 million metric tons of standardized and high-quality products, although the installed capacity is over 4.0 million metric tons. In order to meet the demand, PVMA imports Palm Oil products to the tune of 2.4 million metric tons, besides pro curing Canola, Sunflower, Cotton Seed, Rape Seed and Soya bean Oil from local Solvent Extraction, Expeller and off-course Refining industries. Due to extra-ordinary high rate of applicable duty/taxes regime, this ‘PKR 550 billion Sector’ pay handsomely to the National Exchequer to the extent of Rs 110 billion per annum directly or in-directly, therefore, included in top three revenue spinners of Pakistan.