‘Suspend implementation of 10 percent Import Adjustment Tax’ -- OPDAG

Members of the Oil Palm Development Association of Ghana (OPDAG), a non-governmental association, have asked government to suspend implementation of the Import Adjustment Tax (IAT) on imported crude palm oil (CPO) until the gap between local production and demand is closed.

Government is to impose a 10 percent IAT in addition to the 10 percent ECOWAS Common External Tariff (CET) on imports of crude palm oil. This is in line with a global movement toward Customs unions, wherein ECOWAS is introducing a CET to allow same the Customs duty to apply for all goods entering ECOWAS members, regardless of which country within the area they are entering. ECOWAS is due to implement the CET this year.

A statement submitted to the Ministry of Finance upon consultation with key stakeholders in the oil palm value chain and their representatives, to make known their position on the implementation of the CET for consideration, said the implementation of IAT will effect a rise in production costs on CPO -- which could result in the increase of the fast-moving consumer goods prices.

Being a major net importer of CPO, the country's domestic consumption is pegged at about 370,000 metric tonnes of palm oil in refined and crude form, and imports 260,000 metric tonnes of palm oil.

The gap is in the production base of crude palm oil, the raw material; mostly refiners operate below 50 percent of their capacities.

The installed refining capacity for palm oil in the country is between 1,900 tonnes and 2,200 tonnes per day. This is sufficient to meet local vegetable cooking oil demand and even export to the sub-region. 

Current forecasts anticipate that the country is being faced with a net deficit of up to between 20,000 and 100,000 tonnes of the commodity, estimated at about US$35million annually, following slippages in production of the product.

Nigeria, the largest producer of palm oil in Africa, produces 930,000m/t of CPO and consumes 1,430,000mt -- and has decided to protect the palm industries by imposing import adjustment tax of 25% in addition to CET tariff of 10 %, making 35% duty on importation of CPO. A total of 525,000 m/t of CPO is imported by Nigeria to supplement local production.

The key stakeholders in the oil palm value chain, including Unilever and the palm oil refiners, contended that implementing the IAT will cause a rise in production costs on CPO that could result in increased prices of fast-moving consumer goods. 

It will also take the products out of the reach of common consumers, which will result in a drop of production volumes. 

This will further lead to less revenue generation, as well as a threat to employment due to inefficient operation of the manufacturing units. Local industry may collapse or shrink as a result. 

According to the members, oil palm plantations like Benso Oil Palm Plantation (BOPP), Twifo Oil Palm Plantation (TOPP) and others together with their smallholders and outgrowers may close shop if their palm oil and palm fruit respectively do not find buyers like the refiners and FMCG manufacturers. 

“Already, the industry is suffering due to the current power crisis and challenges posed by the macro-economic difficulties in the country -- such as rising inflation, currency depreciation and high cost of capital -- therefore any further increase in duties will make processing of palm oil very expensive and adversely affect business and the average consumer.”

 The association indicated that policy initiatives for the oil palm sector should be seriously considered for the immediate-, medium- and long-term to help increase local cultivation and production, and also to attain self-sufficiency and even export palm oil. 

The association said it is ready to partner government in development and implementation of the right policies to increase local production.

It also called for urgent enforcement of payment for duties and taxes corresponding to the right quantities under the CET by all importers of crude and refined palm oil. 

In particular, some refined and packed vegetable oil imports are under-declared and/or under-invoiced -- a situation that has become a veritable threat to the local oil palm value chain, the association said.