KARACHI: The Pakistan Vanaspati Manufacturers Association (PVMA) has threatened a nationwide closure of factories if the federal government does not withdraw tax concessions granted to ghee factories in the Federally Administered Tribal Areas (FATA) and the Provincially Administered Tribal Areas (PATA).
During a press conference on Friday at the Federation House, PVMA Chairman Sheikh Abdul Razzaq, along with former chairmen Sheikh Amjad Rasheed and Sheikh Umar Rehan, and other industry representatives, highlighted the adverse impact of these tax concessions on the ghee sector across the country.
PVMA leaders revealed that while the ghee industry in the rest of Pakistan pays Rs 85 per kg in taxes, factories in FATA and PATA pay only Rs 15 per kg. This significant disparity of Rs 70 per kg is causing substantial financial losses to both the government treasury and the ghee industry.
“If the tax concession scheme for FATA and PATA is retained in the 2024 budget, all ghee and oil factories nationwide will shut down from July 1 in protest against this discrimination,” the representatives stated. They added that the PVMA is also planning to seek judicial intervention. Abdul Razzaq pointed out that about 26 oil and ghee factories operate in FATA and PATA, paying only Rs 15 per kg in taxes. In contrast, around 156 ghee mills across the rest of the country are taxed at Rs 85 per kg. This inequity has already forced the closure of 50% of these mills, as they cannot compete with the tax-advantaged factories in FATA and PATA.
PVMA Chief warned that if the government does not address this issue, the price of ghee could increase by Rs 10 to Rs 12 per kg following the approval of the 2025 budget. He noted that FATA and PATA have a combined population of 6.25 million, and the average person in these regions does not consume 17 kg of cooking oil annually. Despite this, the ghee units in these areas imported about 353,000 metric tons of oil in FY24, far exceeding the actual consumption needs.
This over-importation has resulted in a significant loss of tax revenue for the government, estimated at Rs 43 billion annually, as excess oil and ghee are sold in other parts of the country. Over the past six years, the tax exemption has cost the government between Rs 180 billion and Rs 200 billion, according to Abdul Razzaq.
“FATA and PATA’s edible oil and ghee industry has already benefited from tax concessions for the past six years. Extending this exemption for another year is unacceptable. The government must ensure a level playing field for all industries,” he stated.
Sheikh Umar Rehan emphasized that the ghee industry in Pakistan is valued at approximately Rs 2400 billion and is the third-largest revenue-generating industry in the country, contributing Rs 500 billion in taxes. “The government should safeguard its revenue and immediately revoke the tax exemption for FATA and PATA to ensure the survival of the ghee industry,” he demanded.
Pakistan’s ghee industry is on the brink of collapse, with many mills already shut down and others struggling to remain operational under the current tax regime. The PVMA’s ultimatum underscores the urgent need for the government to address the tax inequity to prevent further damage to the industry.