Rice, wheat, and sugar are prominent in Pakistan’s food export basket and domestic consumption; therefore they receive a lot of attention and government support. In promoting crops that are export-oriented in the agricultural sector, the import substitution required to bring down the deficit is mostly overlooked. Palm oil is Pakistan’s top food import. SBP’s recently released quarterly report underlined the importance of decreasing edible oils and oilseeds imports and the measures necessary to make that happen.
Nearly 3 million tons of edible oil, valued at about $2 billion, were imported in FY17 with PBS reporting similar figures for the current fiscal year. SBP valued oilseed imports at $0.8 billion for 9MFY18 with US department of Agriculture predicting that FY18 will be the first time that oilseed imports will exceed edible oil imports.
Oilseeds are increasingly being used for meals by the domestic poultry and livestock sectors. Furthermore, rise in domestic oil production from imported seeds has also increased demand.
The newly established company of Unity Foods Limited is an example of domestic oil production through imported oil seeds; in less than 2 months of operations it achieved a top line of Rs617 million indicating the potential in this sector to grow.
It also has a significant gross profit margin of 17 percent suggesting that this industry is a profitable one and is likely to attract more incumbents.
Awareness about health benefits of edible oil compared to other cooking fats has been increasing due to urbanization. Punjab Food Authority’s ban on manufacturing, sales and purchase of vanasapti has contributed towards that leading to increase in edible oil production and decline in ghee (for more information read “Decline in ghee production”, published on March 28, 2018)
https://www.brecorder.com/2018/03/28/407759/decline-in-ghee-production/
Significant profitability, a growing sector for edible oil and very limited domestic oilseeds production has led to increase in oilseed imports and this trend is expected to continue.
Major oilseed crops grown in Pakistan are cottonseed, sunflower, rapeseed/mustard and canola. While local oil production is growing, the edible oil bill also remains heavy and rising. On another front, import of seeds for poultry feed manufacturing has been on the rise too.
Together, these trends resulted in higher imports of oilseeds as well as edible oils. Policies of the past have led to lower oilseed production and heavy reliance on imports. Support prices of wheat, doing little for the exchequer (for more information read “Cost of wheat support price” published on December 13, 2017) do provide significant incentive for increase in wheat cultivation. Similarly, export subsidy for sugar requires Rs2 billion annually (for more information read “On sugarcane support price”, published on June 14, 2018) but gives farmer higher short and medium term benefits for cultivating sugarcane.
https://www.brecorder.com/2017/12/13/386618/costs-of-wheat-support-price/
https://www.brecorder.com/2018/06/14/423080/on-sugarcane-support-price/
Why would farmers, amongst the poorest in the country, give up these incentives and shift to oil seeds? Continue watching this space for measures that can be taken to address this question.