Pakistan & WTO

16-31 March 2003

Smuggled soaps eroding local industry share
Karachi: Easy availability of imported and smuggled toilet soaps, soap noodles and laundry soaps at lower prices are fast eroding the market share of local manufacturers who are now struggling to compete in the market. For instance, local manufacturers of soap noodles are selling their products at Rs50 per kg, while the importers are easily selling foreign soap noodles approximately at Rs20 per kg after paying all sort of duties and taxes. Toilet soap noodles are being imported in substantial quantities by declaring it a chemical. Chairman, Pakistan Soap Manufacturers Association (PSMA), M. Yaqub Karim, said the huge difference in price was beyond any rationale and importers were doing gross under-invoicing as the price of finished imported noodles were far less than the imported raw materials. Similarly, imported and smuggled toilet soaps are easily available in the markets at affordable rates. He said retail prices of Ella (Turkey), EVA (UAE), Royal Leather (UAE), and Nivea (Germany) beauty soaps were Rs20, Rs23, Rs26 and Rs29 per cake, respectively, which were quite cheap than the locally manufactured soaps, he said. In a presentation to the Central Board of Revenue (CBR), he said these finished soaps were being smuggled into the country without paying any sort of duties and taxes, and the industry could not compete as the landed cost of imported soap was very low and it was being sold in the markets at cheaper rates. He said local industry was losing its sales. To prevent smuggling of finished soap, he suggested that there must be at least 25 per cent cushion between the raw materials and the finished goods manufactured. He added this principal is not practiced in letter and spirit. In the budget 2002-03, the government made a very nominal cut in duties on import of various raw materials, but the reduction in customs duty on import of finished toilet soap to 25 from 30 per cent had vanished the impact. He urged the CBR to impose customs duty in a cascading manner as suggested by the articles of WTO. On finished goods, the highest slab must be applied, while on basic raw materials it should be according to the lowest slab. Mr Karim said the minimum value of imported finished soap should not be less than $1,100 per ton and finished soap in form of noodles at $600 per ton. He urged the CBR to bring down the duty of tallow at zero from 10 per cent in the new budget, besides cutting import duty on palm fatty acid to five per cent from 20 per cent. There should be 10 per cent duty on palm kernal acid oil from the current 25 per cent. He also suggested to cut duties on palm kernal fatty acid distillate, coconut oil and RBD coconut oil to 10 per cent. Three type of soap industries exist in Pakistan. Multinationals generally produce toilet soap and they have full boiled system and imported automatic plant. They use basic raw materials such as tallow and palm stearine for their industries. The second is medium sized industries in the organized sector having full boiled system and automatic plants. They are making laundry and toilet soaps by using tallow and palm steering as basic raw materials for toilet soaps and palm fatty acid distillate and palm acid oil for laundry soaps. There is sizable number of small industries in un-organized sector using semi-boiled system.