Surge in edible oil imports   
By Mohiuddin Aazim

August 1, 2011: THE consumption of palm oil increased 14 per cent to over 1.9 million tonnes during July-June 2010-11, pushing up its import bill by 53 per cent to $2 billion.

Growth in population and in the fast food industries’ business led to an increasing intake of oily food items and higher industrial demand for crude palm oil and so boosted import volume. A surge in international prices was also responsible for a big jump in the import bill.

The industrial demand for crude palm oil was strong in FY11 as is evident from increased import of soyabean oil, which is widely used for blending with palm oil in cooking oil and ghee manufacturing. More than 66,000 tonnes of soyabean oil worth $67 million were imported in FY11 as against about 27,000 tonnes worth $28 million a year ago. Industry sources say, the higher imports, however, are not fully reflected in the recorded domestic production of cooking oil and ghee because a number of oil and ghee makers operate in the informal sector.

Anticipating strong domestic demand ahead of Ramazan, importers are believed to have secured about 175,000-180,000 tonnes of palm oil in July.

And, since orders for July delivery were placed several weeks in advance, most importers have ended up paying a higher per unit price as palm oil prices have eased since then. Industry sources say a big part of July’s import volume comprises crude palm oil or CPO, for use in edible oil refineries. Demand for CPO has been on the rise after a 200-tonne a day refinery belonging to Multi Food Group began operating in Multan earlier this year.

Industrial demand for CPO may remain strong as according to industry sources, eight more edible oil refineries are in the pipeline, including one more unit of the same group.

“Taking advantage of the zero-income tax incentive on new fully-equity based industries (announced in this fiscal year’s budget) we have decided to establish a 300-tonne a day crude palm oil refinery at Port Qasim. We hope it would go into operation before the year-end,” said Mr Amjad Rashid, who heads Multi Food Group of Companies.

He said his 300-tonne edible oil and ghee manufacturing factory at Port Qasim would start production next month, adding that after six months the factory’s entire demand would be met by CPO refinery he is going to set up there.

In 1990s there was just one palm oil refinery in the country but now about a dozen are in operation.

Industry sources say one of the reasons for expanded import volumes of palm oil in the last fiscal year is that the oil and ghee industry not only caters to domestic demand but a large quantity of these items is exported to Afghanistan.

“Previously Pakistani ghee and edible oil used to be smuggled to Afghanistan through misuse of Afghanistan Transit Trade Agreement but lately tightening of the rules of ATTA has put a stop on it,” claimed an industry official.

According to Vice Chairman of Pakistan Edible Oil Refiners’ Association, Rasheed Janmohammad the import bill of palm oil can be reduced drastically by increasing the output of oilseeds and by enhancing the capacity of edible oil refineries and solvent extraction plants. Pakistan’s total requirement of edible oil is close to three million tonnes of which 75 per cent plus is imported and the rest is met domestically. Solvent extraction plants produce soft oil using seeds of sunflower, cotton and canola as well as rapeseeds and mustard etc. In the last fiscal year, total output of oilseeds was below 700,000 tonnes.

Officials of edible oil industry say after the devolution of the affairs of agriculture ministry to the provinces from this fiscal year, production of edible oil ought to go up with decentralised implementation of policies.

In addition to boosting output of traditional oilseeds there is a need to focus on using coconut plantations in Sindh and expanding the experimental plantation of olive in Balochistan and Potohar region, say edible oil industry officials.

Last year, a scientific research department of Karachi University had identified 100 local species of wild plants that can be used for extracting edible oils of different kinds. “There is a need to start experimenting on such plants and see if we can really get results,” said a senior official of Sindh’s Agriculture Department.

Agriculture scientists say that cottonseeds account for roughly 50 per cent of the domestic edible oil production followed by sunflower (30 per cent) whereas the remaining 20 per cent oil is obtained from canola, rapeseeds and mustard.

They point out that per acre yields of all these oilseed crops ranges between 15-45 per cent of potential primarily due to water scarcity and lack of the use of latest technology and farming techniques. Besides, crop losses at the time of harvesting and losses in oilseed stocks due to poor storage, preservation and processing during oil extraction also lowers the per unit output of oil extraction. Provincial governments will now have to address these and other structural issues to make the edible oil extraction industry more efficient.

In the past few years, increased income levels in rural areas has encouraged industrialists to set up solvent extraction plants to cater to the growing demand of cooking oil and ghee across the country in general and in the rural areas in particular.

“Until recently most solvent extraction plants were set up in Punjab. But industrialists now prefer to establish such plants in the industrial zone at Port Qasim and in other industrial areas of Karachi,” said a leading edible oil extractor.

“The reason is the cost of using imported oilseeds in the port city of Karachi is lower than what it could be elsewhere in the country. And it is also easier to export oilseed meals (or what is left over of oilseeds after oil extraction) from Karachi.”


Courtesy: The DAWN