The State Bank of Pakistan has suggested that Pakistan Oilseed Development Board needs to develop an Oilseeds Policy for promotion of oilseeds in the country, in collaboration with all stakeholders including farmers; solvent extractors and poultry feed manufacturers and get it approved by the government at the earliest.
SBP also proposed that pricing support or subsidy may be provided to oilseed growers in order to bring their profitability at par with crops, such as wheat. It said that three policy actions, including Oilseed Policy, production of quality seeds and development of hybrid seeds and Incentives for farmers are required to enhance the domestic oilseed production.
According to a SBP report, for Rabi crop FY18, the government of Punjab has announced a cash payment of Rs 5000 per acre for up to two acres for sowing of canola and sunflower crops. As a result, the area and production under these crops increased, thereby indicating the significance of maintaining incentives in boosting oilseeds production, it mentioned.
The report said Oilseed Policy and support price for Oilseeds would help reduce imports and enhance the domestic crops. It noted that the country's current account deficit already reached all time high level of $18 billion at the end of last fiscal year (FY18) followed by massive surge in goods imports. Import supportive policies and free trade agreements have reduced incentives for oilseed production in the country. Oilseed cultivation is further disadvantaged by absence of adequate machinery and high yielding seed varieties. In FY08, 1.1 million acres area under sunflower was with production of 643,000 tons. In FY17, the area reduced to 0.2 million acres and production to 104,000 tons
The SBP report said several projects are already underway to develop quality oilseeds. In this regard, Pakistan Agriculture Research Council (PARC) has developed a hybrid canola seed variety and planted the same in Northern Punjab and KPK. Furthermore, the olive plantations have been initiated in the Potohar valley. Despite this, more focus is still required on production of quality hybrid seeds locally, mainly to reduce input costs of ultimate beneficiaries, it suggested.
As per SBP report, in spite of being an agrarian economy, Pakistan had to import 2.7 million metric tons of edible oils (soybean and palm oil) worth $2.0 billion in FY17 and 2.2 million metric tons worth $1.7 billion in Jul-Mar FY18 to fulfill the domestic edible oil industry needs. These imports have a share of 88 percent of total edible oil supplies.
According to the report, major oilseed imports, consist of soybean, sunflower and canola seed; imports stood at $0.8 billion in Jul-Mar FY18 compared to $0.6 billion in the same period in FY17.
The SBP report asserted that the country is capable of producing sizeable quantities of oilseeds that would reduce the import bill mostly for oilseeds and partly for edible oil. Presently, major oilseed crops in the country are cottonseed, sunflower, rapeseed/mustard and canola. Local oil production on average remained 0.6 million tons during FY08-FY17, whereas the total edible oil availability stood at 3.2 million tons, indicating low quantity produced domestically. It further said that various policies have led to lower oilseed production besides heavy reliance on imports. Supportive pricing policies for wheat and sugarcane have had a distortional impact on oilseed production as evident from decline in area under oilseeds, it noted.
The report pointed out that import supportive policies and free trade agreements for oil imports reduce incentives for local oilseed production. In July 2015, custom duty on soybean seed was reduced to 3 percent compared to 10 percent on soymeal imports (used in poultry feed), hence resulting in increase in imports of soybean seed compared to soymeal.
Furthermore, at the start of July 2014, the sales tax on soybean was reduced to 6 percent compared to 16 percent on canola or sunflower for solvent extractors, resultantly the import of soybean for solvent extraction went up from a mere 50,000 tons in FY15 to 640,000 tons in FY17.
The SBP said that glut of wheat and sugar in the market provides opportunity for oilseed crop promotion to shift farmers' focus away from surplus-producing crops. Sugarcane was planted on an area of 1.3 million hectares, with cane production of 81.1 million tons in FY18. This will produce about 6.3 million ton sugar, whereas the country's requirement is around 3.4 million ton (16.3 kg per capita consumption). This means 0.6 million hectares is cropped extra than required which can be used for oilseed cultivation, it said, citing Pakistan Oilseeds Development Board as a source of information.
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