The production of vegetable ghee and edible oil recorded a modest increase in the last few years as demand remained strong and edible oil refining received new investment.

Cooking oil output rose from 311,000 tonnes in FY11 to 323,000 tonnes in FY12, and to 355,000 tonnes in FY13. Vegetable ghee production went up from 1.092 million tonnes in FY11 to 1.103 million tonnes in FY12, and to 1.145 million tonnes in FY13.

Manufacturers of oil and ghee say output would rise further during the current fiscal year and in the years to come as exports to Afghanistan under the manufacturing bond facility is to begin shortly, and local demand is becoming stronger on faster economic growth.

During the first five months of FY14, ghee production has already risen by 5pc to 475,000 tonnes, and that of cooking oil by 7pc to 150,000 tonnes.

Revenue officials say export of vegetable ghee and cooking oil is allowed under Duty and Tax Remission for Export Scheme (DTRE). At a meeting held in the last week of January at the ministry of commerce, it was decided that the scope of DTRE would be extended to exports to Afghanistan under the manufacturing bond facility as well.

Meanwhile, rising local demand for ghee and cooking oil is also facilitating new brands and creating space for different varieties and retail packaging.

“We call it sub-brandings; newer products in an already existing category,” says an official of Habib Oil Mills, makers of the Habib Cooking Oil, while boasting of about a dozen oil and ghee brands under the Habib umbrella.

“A few of them have been launched recently to cater to a different market segment that earlier remained untapped or under-exploited.”

The same is true for other major brands. Dalda Foods, for example, is also marketing a dozen or so ghee and cooking oil products, varying in packaging sizes and prices, but all falling under just three brand names — Dalda, Manpasand and Planta.

Growth in cooking oil and vegetable ghee output has led to higher imports of palm oil and soybean oil as well, which are used as raw materials. “But improved supply of local oilseeds is expected to keep the rise in import volumes of palm and soybean oil somewhat under check,” says a production manager at an edible oil refinery in Karachi.

Quoting the USDA report, he says oilseeds production in (October-September) 2013-14 is set to rise to 5.4m from 5.1m tonnes in the year-ago period.

This is expected to keep oilseed imports under check. Industry sources say imports of rapeseed/canola averaged around 750,000 tonnes in the years 2011 and 2012, substantially down from 1.165 million tonnes in 2010. They, however, point out that initial estimates put the 2013 oilseeds imports at around 800,000 tonnes, still far lesser than in 2010 but higher than in 2012.

“Lower output of cottonseed has increased the need for imported oilseeds in 2013,” says an official of the All Pakistan Solvent Extractors Association.

But government officials say the output of cottonseed is expected to show at least an eight per cent increase in the 2013-14 marketing year (October-September), though they admit the production of sunflower and rapeseed may decline because of shrinkage in the area under their cultivation.

Industry officials say vegetable ghee and cooking oil mills have the capacity to produce more than two million tonnes of products each year, but due to tariff and other constraints they are currently utilising around 50-60pc of their capacity.

They say the mushrooming of ghee and cooking oil units in the informal sector is also a big challenge. Issues like tariff and gas and electricity supplies make full capacity utilisation difficult.

Small- and medium-sized cooking oil manufacturers point out that a nexus between top industry players and oilseed suppliers is preventing uniform growth in the industry. Some big mills are utilising up to 80 per cent of their installed capacity, while the smaller ones are running at below 50 per cent.

“Control over raw material matters,” says a Punjab-based medium-sized cooking oil manufacturer.

Oil-bearing crops, being of short harvest season, require immediate procurement and full-year storage to ensure uninterrupted oil extraction. This has given an edge to cooking oil mills that have their own oil extraction plants and a whole network of oilseed crop suppliers/contractors. Smaller mills can’t make similar arrangements and have to rely on contractors to buy base oil extracted from domestic oilseeds.

These contractors overcharge them. And imported oilseeds also become costlier for mills that are located farther from sea ports. Such millers demand development of a fair pricing system for domestically produced oilseeds. — Mohiuddin Aazim