April 29 this year President of the Republic of Uzbekistan Sh. Mirziyoyev signed the Law on Amendments to the Tax Code. The document provides for exemption from VAT on a number of food products.
The decision was made in order to guarantee the needs of the population of the republic in certain types of food products and to prevent unreasonable price increases during the ongoing global coronavirus pandemic.
The Law "On Measures to Provide the Population with Certain Types of Food Products" introduces amendments to the Tax Code and following are exempt from value added tax (VAT) from May 1 to December 31, 2021: the import of vegetable oil, sunflower seeds and flax, as well as soybeans beans; turnover for the production and (or) sale of vegetable oil (except for cottonseed oil).
From May 1 to December 31, 2021, export customs duties were introduced for certain types of food products.
Also, business entities are allowed to export no more than 50% of the produced vegetable oil (TN VED codes 1512 11 - 1512 19), obtained as a result of processing of imported sunflower oil and sunflower seeds by these subjects.
In this regard, the Center for Economic Research and Reforms (CERR) analyzed the factors that influenced the growth of vegetable oil prices in the republic.
The average price of vegetable oil in the republic at dekhkan markets in April of this year amounted to 16,271 soums, which UZS 5451 more (50% growth) than in the same period last year.
In 2020, about 500 thousand tons of vegetable oil were sold in Uzbekistan. The share of imports accounted for 57% (285 thousand tons) and the share of local production - 43% (249 thousand tons, including exports of 32 thousand tons).
The jump in prices for vegetable oil in Uzbekistan is explained by several factors:
The Food and Agriculture Organization of the United Nations (FAO) Vegetable Oils Index rose from 81 points in April last year to 147 points in February 2021 (an increase of 81%).
In the external market and in exporting countries, production volumes are relatively low compared to previous seasons and therefore a procedure of high customs duties on the export of sunflower oil and seeds has been introduced.
Thus, the growth of import prices for sunflower oil is influenced by the introduction of export restrictions by large partner countries. In particular, in Russia, from January 9 to June 30, 2021, the duty on the export of sunflower seeds outside the Customs Union has been increased from 6.5% to 30%, but not less than 165 euros per ton.
Note that the production of sunflower seeds in the Russian Federation in 2020 decreased by 13.7% compared to the previous year. According to Rosstat, the price of sunflower oil increased by 26% last year in Russia.
At the same time, the large enterprises of the industrial sector of the republic produced 249 thousand tons of vegetable oil, which is 5 thousand tons more (2%) than in 2019. For January-March of this year 78.3 thousand tons of vegetable oil were produced, which is 2.3 thousand tons more than in January-March 2020 year.
Another factor influencing the rise in prices is the expected entry into force of the law on VAT exemption for imports of vegetable oil. As a result it led to the accumulation of excess volumes of vegetable oil in customs warehouses. So, as of April 27 of this year, the customs warehouses contained 3.5 thousand tons of sunflower oil for 4.7 mln dollars, and at the beginning of May (May 4, 2021) there were already 6.5 thousand tons of sunflower oil.
At the same time, the growth in prices for vegetable oil has slowed down.
So, according to operational data, last week there was a decrease in the growth of prices for vegetable oil by 1.5%, and a week earlier by 5%. These market indicators show a tendency towards stabilization of the price level for vegetable oil.
Center for Economic Research and Reform
Public Relations Service