The Pakistan Oilseeds Industry has made a remarkable progress and has displayed its resolve to be an import substitution industry, providing high quality soybean and canola oil, catering to the poultry feed industry by producing nutritious and cost effective meal, and saving precious foreign industry that would have otherwise been expended on imports of oil and meal. The soybean extractor units jumped from a small figure of nine to an impressive seventy-five in just a few years. The future looked positive and the mills were all set to consider export of meal to China and other countries.
However, the narrow-mindedness of policy planners and their minions find it hard to digest the progress of any industry in the private sector. The ominous black arm of the petty and prejudiced began to shatter the rosy development. A concerted, multi-pronged, macabre scenario was contrived to choke the survival of the industry. It all began with the asinine decision to re-fumigate the oilseeds by Methyl Bromide before discharge of the cargo. It goes without saying that the oilseeds are fumigated at load port by using Phospine. Methyl Bromide is banned in every country except Pakistan and India. Moreover, the contract for fumigation was handed to a private party without going through the PPRA process. Hence, there have been arbitrarily increases in rates and in exposure time.
What damage did this horrendous decision lead to for the oil mills? First and foremost, the vessels are chartered at US$ 20-22,000 per day and then due to the stipulation of first conducting lab-test, then fumigation, and then three days of exposure time, the importers incur huge demurrage. At the FAP Terminal, with its limited storage capacity, the demurrage is anywhere between US$ 250,000 to 500,000 per vessel. Moreover, this policy has resulted in increase in prices of chicken and edible oil and will further increase in the weeks to come. The possibility of closure of solvent mills, feed mills, and even the production of chicken and eggs is looming on the horizon.
The FAP Terminal at Port Qasim is another threat. FAP has storage capacity of 60,000 metric tonnes (MT) in its silos, while the storage capacity limit in its warehouses is about 20,000 MT for fertilizer. It cannot handle more than 10,000 MT per day. Any Terminal that can discharge, for example, 15,000 MT per day should have minimum capacity to stock 150,000 MT or about ten days. The inadequate bagging capacity is less than 10,000 MT, far short of the desired capacity of 15,000 MT. Thus, bulk loading is resorted to mitigate the low capacity. Trucks line up for even upto 24 hours before they receive their load.
However, FAP Terminal, a monopolistic juggernaut, is insensitive to enhancing its storage capacity and this attitude has negatively impacted on those using its services. The amount of demurrage collected by FAP far exceeds the capital cost of increasing storage capacity within just one year, only if the concerned authorities had imposed their writ.
This isn't the only backbreaking imposition due to this monopolistic attitude of FAP Terminal bosses. Despite contracted rates as per the agreement between PQA and FAP Terminal that rates would be maintained as per tender, the FAP hierarchy keeps on raising the rates on a semi-annual basis while the authorities turn a blind eye to this extortion. The rates have zoomed up to US$ 7 per MT whereas the comparable rates at ports in nearby countries are less than US$ 3 per MT.
FAP is adding woe to misery by reducing the free time, which is a gross violation of the agreement as per tender and against the gazette notification of PQA storage policy and specifications. Storage time has been quietly changed from ten days after completion of discharge to ten days from berthing of the vessel. Complaining to PQA is a futile exercise for reasons best known to the PQA hierarchy. Granting of exclusivity to, and violating the terms and conditions, such as storage charges, by FAP, reeks of underhanded deals that need thorough investigation.
The industry also has to pay high stevedoring charges. Any economist would agree that this is a regressive tax. Moreover, 12% Income Tax is added to the Terminal charges and this steep tax rate makes handling of edible oil more expensive. But this is not all. Sales tax at 13% imposed by Sindh Board of Revenue is another front-loading on the total additional cost of the cargo. Then there is the substantial inland transportation cost. The perennial shortage of trucks, the high cost of diesel, and the miscellaneous expenses incurred during the transportation, all club together to a high cost of US$ 28 per MT when the cargo is trucked to units in Punjab. Trucks, trailers, and dumpers are not allowed within city limits except between 11 pm and 6 am and thus the loading and dispatch are limited due to this short timeframe.
All in all, a doomsday scenario is being developed and the ramifications are serious. Prime Minister Imran Khan has to step in and catch the bull by its horns. The policymakers will go home richer while the ultimate blame will definitely be laid at the Prime Minister's portal. Decision making time is today, Mr Prime Minister.
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