Pakistan plans four new crude palm oil refineries

KARACHI, Mar 18 (Reuters) Encouraged by low tax rates on the import of crude palm oil (CPO), Pakistan's leading edible oil buyers plan to set up four new refineries with a total capacity of 2,200 tonnes a day, industry officials said on Saturday.

The planned refineries, most of which will become operational by the end of 2007, will double the country's CPO refining capacity, presently is at 2,025 tonnes a day.

''Tax advantage on the import of CPO for refineries is the main driving force behind setting up the plants,'' said Waheed Sheikh, chief executive of Waheed Hafeez group, a trading venture with Singapore's Wilmar Trading Pte.

Pakistan currently charges a fixed 9,550 Pakistani rupees per tonne as a regulatory and customs duty on CPO imports, in addition to a 15 per cent sales tax. But refineries are allowed to import CPO at the rate of 9,000 rupees per tonne.

''Secondly, CPO is much cheaper than the olein and the price difference is to per tonne,'' Sheikh said. ''So making one-time investment in refinery is a good business proposition, which we have already seen in many countries, including India, in recent years.'' Waheed Hafeez group's venture with Wilmar will end by June 2006, and it has planned to set up a plant with a European firm.

Sheikh said the initial cost was estimated at 400 million rupees (.647 million) and construction would start later this year.

At present, five refineries are operational in Pakistan, while the country's biggest refinery of 1,000 tonnes per day by a leading edible oil trading house, West Bury Pvt Ltd, will become operational in April.

Two other local firms, Habib Oil Mills (Pvt) Ltd and Hamza Vegetable Oil and Ghee Mills, have also planned to set up plants.

Importers said new refineries would boost CPO imports.

''Our daily requirement of palm oil is around 4,300 tonnes and, with the setting up of new refineries, we will see a jump in CPO import in the next two or three years,'' said Akbar Puri, chief executive of Karachi-based Agro Commodities.

FOURTH LARGEST Pakistan is the world's fourth largest consumer of vegetable oils, with a domestic demand of 2.5 million tonnes, 90 per cent of which is covered by imports, mostly of Malaysian RBD palmoil and olein. Domestically produced cottonseed oil covers the rest.

According to government data, Pakistan spent 1 million on vegetable oil imports of 965,478 tonnes in the first seven months of fiscal 2005-06 (July-June), compared with 7 million for purchases of 844,627 tonnes in the same period last year.

Palmoil soared to 952,716 tonnes worth 1.237 million, from 814,368 tonnes worth 7.325 million.

Industry officials estimated an annual import of 1.6 million tonnes of palmoil from Malaysia, a major portion of which will be refined palm olein.

They said they expected edible oil imports to increase seven percent annually due to population growth of about three per cent, rapid urbanisation and rising per capita income in Pakistan.

''Afghanistan's demand is also supporting our imports and around 10 per cent of our buying goes there,'' said Ahkter Ashraf, a trader in the north-western city of Peshawar, near the Afghan border.

REUTERS SD PM1527