Majyd Aziz
PAKISTAN is primarily an
agriculture country. However, the agriculture mix is heavily based on cotton,
wheat, maize, rice, and sugar. Notwithstanding the importance of these crops in
the farmland, the unwillingness of agriculturists to branch out to other crops
is blatantly evident. Pakistani farmers are not keen to forcefully address
edible oil crops despite the growing demand for these products. Hence, Pakistan
depends on huge imports to cater to the local needs.
The reluctance to develop a strong
base to grow rapeseed, canola, and sunflower is basically due to considerations
of profits, but it has also to do with bare utilization of modern farming
practices. The farmers are comfortable with the traditional crops and would
prefer to grow pulses rather than, for example, sunflower. This is evident from
the statistics provided by Pakistan Oilseed Development Board for the last
three years. The production of rapeseed for 2012-13, 2013-14, and 2014-15 was 216,000,
189,000, and 181,000 tons while the rapeseed oil produced was 66,000, 60,000,
and 58,000 tons. The canola production of oilseed and oil has remained stagnant
at 16,000 tons and 6,000 tons respectively. The production of sunflower oilseed
during the above period was 244,000, 190,000, and 178,000 tons while oil
produced was 95,000, 76,000, and 68,000 tons.
The above figures reflect the
missed opportunities of crop diversification, demonstrate a massive dependence
on imports, and reveal the inability of the policymakers to pro-actively support
the farming community and convince them to grow these crops. The bureaucratic
mindset to take the easy way out and rely on fast-track imports is never a
prudent policy. The volatile global marketplace, the vagaries of climate,
especially El Niño, the currency factor, and the inland transportation freight
are factors that impact on the overall cost of imports.
The imports of rapeseed, canola, sunflower,
and soybean seed is worth considering. Rapeseed/canola imports for 2013, 2014
and 2015 on basis of arrival were 534,384, 982,870, and 806,766 metric tonnes
while imports of sunflower seeds went up from 185,985 to 193,186 metric tonnes
and then drastically dropped to only 30,486 metric tonnes in 2015. However,
soybean seeds imports commenced in 2014 with a negligible import of only 9,094
metric tonnes but shot up to 579,724 metric tonnes in 2015. This exhibits a
strong preference for soybean by the solvent extractors in Pakistan.
The prime reason for the upsurge in
soybean imports was the shift from rapeseed/canola to soybean. Najib
Balagamwala, who spearheaded the imports and facilitation of soybean seeds, stated,
"24 solvent plants shifted from canola because it had reached a saturation
point resulting in negative profit margins from crushing. Today, the position
is that Pakistani importers have contracted around 1.45 million metric tonnes
of soybean. Of course, this shift led to a shortage of canola oil and sunflower
oil as nearly 45% of the mills crushed only soybean seeds."
Rasheed Janmuhammad, a big
name in edible oil, said, "there has been substantial increase in oilseeds
into Pakistan every year, that is, 62.4% in 2014 compared to 2013 and 19.56% in
2015 compared to 2014". He added that "2015 has been the first year
that Pakistan has embarked very aggressively on the journey of importing
soybean due to quite weak global prices and the duty advantage over other
oilseeds. This shift of buying soybean will ultimately reduce the import of
other oilseeds like canola, rapeseed, and sunflower." He further disclosed,
"the huge crop of edible oil and oilseeds all over the world has made the
sellers do aggressive marketing and thus there is a glut of edible oils at the
consumption stage. The case of Pakistan is worth considering. Domestic
entrepreneurs have covered a reasonable quantity of soybeans during 2015 and
sufficient coverage for their requirements for the first six months of
2015." Najib Balagamwala echoed this statement and said that over 32
Pakistani entrepreneurs visited Romania and Australia to study the oilseed
business and firm up future deals.
Shakil Ashfaq, Vice
Chairman, All Pakistan Solvent Extractors Association, lamented that "the
growth of local crops has been disappointing, with less than 15% of the total
edible oil demand being currently met through domestically produced oilseeds".
He reasoned, "the support price for wheat being maintained by government
is too high compared to international market and this has hampered the growth
of oilseeds crops". He also added that "Pakistan is the 11th largest
poultry producer in the world, with a production exceeding 8 million metric
tonnes of poultry feed. With the recent trend among feed millers to increase
soybean in the formulation, the demand for soybean is rising rapidly. However,
the current inclusion rate for soybean meal in poultry feed is about 12% which
is fairly low. Given that poultry is growing steadily at rate of 8%, there is a
great potential for growth in crushing of soybeans."
The annual per capita
consumption of edible oil in Pakistan is only 17 kg with total consumption
around 3.70 million metric tonnes. Pakistan produces between 0.50-0.70 million
metric tonnes and thus 2.60 million metric tonnes are imported. The total
import bill for edible oil is about $ 2 billion while the imports of oilseeds
are approximately $ 0.50-0.60 billion. Pakistan has emerged as a major global
player in edible oil market. The production of soybeans in the world has
increased much faster than that of other oilseeds. At the same time, the trend
towards utilizing soybean in Pakistan would ensure ample supplies of imported
soybeans, and it is predicted that this would ensure continuity and attractive
prices. Najib Balagamwala estimated that he foresees imports of 2 million
metric tonnes of soybean and 1 million metric tonnes of canola, rapeseed and
sunflower, mainly due to industry stability and duty protection for the solvent
extractors and oil mills.
It can be rightly said
that the local farmer is not eager to switch to canola, rapeseed, or sunflower
due to production and cost viability. Thus, dependence on imported soybean
augurs well for the local solvent extractors. At present, the import duty is
2%, the Federal Excise Duty is Rs 400 per metric tonnes, sales tax is 6%, and
advance income tax is 5.5%. It is proposed that these front-loading duties and
taxes must be zero-based so that the consumers get the finished product at
favorable rates and, at the same time, Pakistan would be in a position to
export to neighboring countries. A cost-effective and efficient supply chain
would be the ensuing result. Pakistan has the potential and expertise to excel
and further develop the edible oil industry.
No comments:
Post a Comment