Scam Worth Billions Unearthed in Pakistan’s Ghee Industry

Pakistan is hit by the crisis of every kind: there is the novel coronavirus wreaking havoc among masses, and there are business moguls fleecing billions of rupees from masses hit by the virus restrictions.

In the past few months, the country has seen all sorts of crises from wheat to sugar to petrol – and now, another multibillion rupees scam has been unearthed in the Ghee industry.

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As identified by the Ministry of Industry and Production (MoIP) in its report, the industry of vegetable ghee and oil has fleeced up to Rs. 30 billion from the virus-ridden nation by not passing on the reduction of Rs. 50 per kg to the end consumers at the retail level.

The downward revision in price was due because of drastic cuts in oil prices in the international market, MoIP said.

In a letter on June 8, the ministry mentioned that during the last five months, the prices of palm oil have gone down by more than $260 per ton in the international market, but the huge relief was not passed on retail level despite prior commitment.

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According to MoIP’s calculation, the freight on board (FOB) price of refined, bleach and deodorized (RBD) palm oil on January 02 was at $789 per ton, which dropped to $512 till the end of May, going down by $277 per ton during five months. This should have translated into a price cut of Rs. 60 per kg at the forex rate of $1: Rs. 155.

If we keep the forex rate at $1: Rs. 165 which was the highest exchange rate during the last 45 days, the impact of these Rs. 10 escalations (Rs. 165-155) worked out for a reduction of Rs. 7.74 per kg in the retail price of vegetable ghee for this forex rate escalation only. This means that there should have been a reduction of Rs. 50 per kg in each brand.

Similarly, the costing model of PVMA is also faulty as it adds withholding taxes to the cost of ghee/edible oil which is not the liability of the consumers, it mentioned.

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The ministry took up the task on February 17. Within a few weeks, it completed its homework and held a meeting with the chairman of the Pakistan Vanaspati Manufacturers Association (PVMA) on March 02. The association committed to passing on the benefit of reduction of international palm prices on to consumers but failed.

It also wrote several letters to the association in just one month, but hasn’t heard from them, it said.

Consequently, the ministry of industries has asked the Competition Commission of Pakistan (CCP) to take action against the corrupt elements in the ghee industry.