Exclusive on Edible Oil

Edible oil Tops food imports

by Dr. Noor Ahmed Memon.
The edible oil imports stood at $2.43 billion out of the total import volume of $4.49 billion in 2011-12. Growth in population and in the fast food business led to the increasing intake of oily food items and higher industrial demand for crude palm oil, thus leading to a boost in import volume. A surge in international prices was also responsible for a big jump in the import bill. The countrys demand for palm oil usually increases around 6% to 7% in the two to three months before Ramazan. The country consumes around 2.3 million tonnes of edible oil per annum, out of which 0.63 million tonnes is contributed by the local growers while the remaining is imported to bridge the gap between demand and supply. Pakistan imports around 8% of its total edible oil imports from Indonesia. After linking of the imports with the composite rates of dollar, the unabated increase in edible oil prices has already hit the masses severely as the price of palm oil in local markets. Vegetable ghee and cooking oil industry is one of the largest manufacturing sectors in the country and has grown since the countrys independence in 1947. The production was 835 thousand tonnes in 2000-01, reached 1,180 thousand tonnes in 2006-07 and fell to 1,070 thousand tonnes in 2011-12. This industry was nationalized in 1972; however, since 1988, the private sector has been allowed to run this industry. At present, the industry has 160 small and medium sized vegetable oil and ghee units that are contributing a huge amount to the national exchequer, in the form of duties and taxes. Out of the total units, about 87 firms are members of PVMA, and have produced products of about 1.07 million
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tonnes during 2011-12. There are a large number of unregistered firms who are filling the gap between demand and supply. Annual consumption of edible oil has reached 2.3 million tonnes, of which 20% of the supply is from domestic sources and the remaining quantity is imported. The import during the year 2009-10 of edible oil (Soybean & Palm Oil) was $1,979 million that rose to $2,426 million in 2011-12, showing an average increase of 7% per annum. Imports are made under Malaysian Palm Oil Concessionary Trade Agreement (MPOCTA), like Free Trade Agreement (FTA). Pakistan was the third largest importer of Malaysian palm oil in 2009 as its import has reached over 1.73 million tonnes. The EU is the second largest importer of palm oil with 1.89 million tonnes. China remained the largest importer of palm oil with an annual import of 4.03 million tonnes. Pakistans edible oil industry has 10 refining units, which import crude palm oil. When crude oil is refined, it is used by the manufacturing units of the refineries or sold in the local market to other manu-

Table 2: Production of Vegetable Products Year

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Units
84 87 87 87 87 87 87 87 87 87 87

Production (000 Tonnes)

835 797 771 888 1,048 1,052 1,180 1,137 1,062 1,076 1,070

Source: Federal Bureau of Statistics, Government of Pakistan.

facturers. Import volume of vegetable oil in Pakistan is given in Table-1. As substantial foreign exchange is spent on the import of edible oils, the government has encouraged private investment for commercial edible oil seed farming, production of edible oils, processing and marketing of edible oils. The main domestic source of edible oil is cottonseed, rapeseed, mustard seed, canola and sunflower. About 64 solvent extraction plants are producing 0.63 million tonnes, 20% of local demand. The product market can be classified into two categories; vanaspati and cooking oil. Cooking oil is purified fat of plant origin. Alternatively, when the process of hydrogenation is applied to vegetable oils and fats, it results in the conversion of liquid vegetable oil to solid or semi-solid fats, which have different melting points. This hydrogenated oil is called Vanaspati ghee in Pakistan. Statistics pertaining to

Table 1:Import of Vegetable Oil (Quantity: 000 Tonnes) Value: US $ Million 2009-10 2010-11 2011-12 Palm Oil
Quantity Value Quantity Value Quantity Value 1,702 1,951 27 28 2,375 2,021 66 67 2,109 2,375 39 51 2,148 2,426

Soybean Oil

Total
1,729 1,979 2,441 2,088

Source: Federal Bureau of Statistics, Government of Pakistan.

Exclusive on Edible Oil

the production of vegetable products are listed in Table-2. The main edible oils consumed by Pakistani consumers are as follows: Palm oil Cotton seeds oil Rapeseed and Mustard oil Soybean oil Sunflower seeds oil Canola oil The Pakistani people mainly consume sunflower, canola and soybean oil whilst the others are utilised mainly as ghee, a hydrogenated solid vegetable oil. Nowadays, in Pakistani cuisine, ghee is utilised for frying and cooking, whereas sunflower, canola and soybean oils are usually used for cooking and seasoning. Traditional cuisine varies in Pakistan: in NWFP people prefer ghee or animal fats. In Sindh, traditional habits include a higher consumption of vegetable oils. Raw materials: The country has two main sources of edible oils, cotton seed, which is a by-product of the cotton ginning industry, and rapeseed or mustard seed which is traditionally grown on rainfed marginal lands. The country also grows sesame and groundnuts but their production is very limited and the cost is too high to yield competitively-priced oils. The former are cultivated traditionally and include cottonseed, rapeseed, mustard, sesame and groundnut. Sunflower, safflower and soybean are more non-conventional introduced in the 60s in the backdrop of the Green Revolution. The contribution of cottonseed and rapeseed in total domestic requirements is 80%. Sesame and corn oil contribute 3%. On the other hand, the contribution of non-conventional crops is only 17%. During the course of history, several governments have tried to increase its production. Efforts were made to increase the area under non-conventional crops. Neither area nor production could increase to a greater extent. Production is lower than the potential. In the same way, the yield of oil crops per unit area is lower than other counties. A number of factors are contributing to this situation. Sunflower is an important crop that has the potential to become a major oil seed crop. However,
July - August 2012

Table 3: Production of Edible Oil Seeds Rapeseed & Mustard (000 Tonnes)
180.8 221.0 198.9 162.9 162.2 165.0

Year

Sunflower (000 Tonnes)

348.3 407.2 603.9 420.5 325.5 329.0

soybean (Tonnes)
421 32 29 31 51 50

Ground Nut (000 Tonnes)

69.1 73.9 83.4 85.5 53.2 50.0

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Source: Federal Bureau of Statistics, Government of Pakistan.

its sowing season overlaps the sowing season of wheat. Owing to better support prices and marketing system available for wheat, farmers are bound to prefer growing wheat. In the cotton zone, farmers are reluctant to grow sunflower because its maturity period overlaps the sowing season of cotton and thus causes delay in the sowing of the latter. This delay results in significant reduction of lint yield. Sunflower is an exhaustive crop. It consumes a large amount of nutrients essential for growth and depletes the soil from the nutrients. Farmers add huge amount of fertilizers to get good yield of cotton. After harvesting the sunflower, the likelihood of attacks from insects, pests and diseases on cotton crop increases further. Non-availability of modern technology for sunflower and canola is an impediment to the increasing of the area under these crops. Cultivation practices are not standardized and varieties for different climatic zones are not evolved. Average yields are very low. The yields of rapeseed, cottonseed, sunflower, soybean and canola are 852, 1244, 1271, 573 and 1246 kilograms per hectares, respectively. The non-availability of hybrid seeds, high cost of foreign imported hybrid seed, high cost of storage, lack of drying facilities, lack of modern production technology, use of marginal lands, non-availability of short duration varieties, lack of rhizobium inoculum, low prices of farmers' produce and high harvesting cost are factors hindering the farmers to adopt non-conventional oilseed crops in crop rotation. It is

high time that this situation was improved to meet domestic demand. It is important to popularize the cultivation of sunflower among the farming community. Evolution of early maturing varieties, stabilization of support prices and strengthening of the marketing system are incentives that may prove helpful in this direction. Statistics regarding the production of edible oil seeds are given in Table-3. The Pakistani market for edible oils is changing. A shift to oils, rich in unsaturated fats, has been taking place, which has been approved by the stakeholders. This shift is led by the wealthier and more educated part of the population that can afford this change in their consumption behaviors. The shift requires time because it involves two main aspects: change in eating habits (that are linked to health awareness but also to traditional behaviors) and competition in foreign edible oils markets. Vanaspati Ghee and cooking oils are widely used in different forms of cooking, baking, sauteing and deep frying and are also used at domestic and commercial levels. Dietary habits all over the world, including those in Pakistan, are changing fast. Low fat, low cholesterol cooking oils are replacing ghee as cooking items. Besides health awareness, increase in per capita income is contributing to the increase in the use of cooking oil. Almost 5% consumers in urban areas of Pakistan are shifting to cooking oil from vanaspati ghee. However, in rural areas, ghee is still given preference, as it is considered more nutritious.
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