DOMESTIC production of edible oil is increasing, cutting into foreign exchange spending on imports of palm oil. This is due to increased availability of imported oilseeds, coming into full operations of new edible oil refineries set up in last two years and better functioning of oilseed extraction industry.

Combined imports of palm oil and soybean oil fell 1.067 million tonnes during July-December 2012 from 1.132 million tonnes. Naturally their cumulative imports bill also shrank to $1.068 billion from $.1298 billion. Part of this saving in foreign exchange was due to lower imports but part of it was also because of the lower-than-usual average international prices of palm oil.

A big 10.8 per cent increase in domestic output of edible oil (to 169,000 tonnes) and a slight decline of 2.2 per cent in production of vegetable ghee (to 549,000 tonnes) in July–December 2012 made it possible for the country to cut imports of palm oil.

But higher demand for some particular types of edible oil in which soybean is also added, imports of soybean oil (which is just a fraction of overall imports of raw material for edible oils) were slightly higher — 34,000 tonnes in July-December 2012 against 27,000 tonnes in a year-ago period.

“On balance, our edible oil industry is working well though a couple of issues keep growth momentum low,” says chief executive of a Karachi-based company that manufactures a famous brand of cooking oil.

“Output has been on the rise; a six per cent plus expansion in FY11 followed by a 5.2 per cent increase in FY12 and I believe that in this fiscal year production growth would be in double digits.”

A record cotton crop in the last cropping year had boosted output of cotton oilseeds by 23 per cent year-on-year to 4.616 million tonnes. And a larger-than-expected sunflower crop had also led to 9.5 per cent increase in output of sunflower oilseeds to 750,000 tonnes.

Since cotton oilseeds and sunflower seeds make up about 90 per cent of the total oilseeds stocks in Pakistan, the total stocks of oilseeds had become large enough to meet more of the requirements of edible oil industry than before and had cut into the import volumes of rapeseed/canola.

Industry sources say that imports of rapeseed/ canola are estimated to have averaged around 750,000 tonnes mark in 2011 and in 2012, from as high as 1.165 million tonnes in 2010.

These two years (2011 and 2012) proved very good for edible oil industry basically because our production of oilseeds remained high generating a lot of activity in solvent extraction industry and also because new large-scale edible oil refineries were set up in Karachi, Multan and in other parts of Punjab,” owner of one of the Karachi-based refineries told Dawn.

But he was a bit worried about future outlook of oilseed supplies because this year’s declining trend in cotton output “is estimated to lower our cotton oilseed output to 4.4 million tonnes and rains-related damage to sunflower crop may result in reducing the supply of sunflower seeds to 700,000 tonnes or less”.

Industry sources also say that in the last two years, supply of domestically produced rapeseed/mustard and canola has remained flat and they had to rely on imports of these oilseeds.

Launching of a few new brands of canola oil, corn oil and olive oil along with marketing of the imported brands of these cooking oil have changed the dynamics of cooking oil industry in that it has reduced demand for vegetable ghee.

As more and more people are becoming health-conscious, the use of vegetable ghee is witnessing gradual decline in urban retail markets.

However, in rural areas and in eateries of even urban centres, consumption of vegetable ghee is still common. “While manufacturing cooking oil we use lesser quantity of base oil i.e. RBD palm oil than we use in making vegetable ghee.

So, a decline in ghee production automatically lessens our import requirements of palm oil,” said a production official of Habib Oils, makers of the Habib brand of cooking oils and ghee.

Production of vegetable ghee fell 2.2 per cent year-on-year to 549,000 tonnes in the first half of this fiscal year, after showing a milder decline of 1.5 per cent in the entire last fiscal year.

An estimated bumper maize crop of at least 4.5 million tonnes during the current cropping year, up from 4.3 million tonnes and 3.7 million tonnes in the last two years respectively, have further brightened scope for sustained growth in cooking oil production in the country. The upward trend in maize (corn) output has helped edible oil making companies launch a few new brands of corn oil in the last two and half years.

Of late edible oil industry has also done some experiments in more innovative blending of oils.

The recent launching of Canolive oil is one of the several examples of it. Canolive oil is a formulation of canola and sunflower oil enriched with olive oil.

Industry sources say that if the government and the private sector join hands to promote cultivation of olive oil in the potohar region and in Balochistan and the country starts producing commercially viable large amounts of olive oil, the trend to fortify edible oils with olive oil would rise further.

An official of a private company Zaitoon (olive) Pakistan Ltd, told Dawn that the use of olive oil is picking up in hygienically aware and well-to-do people of Pakistan adding that his company supplies olive oil not only in the retail market but also to a dozen corporate clients including five-star hotels and chains of super stores. —Mohiuddin Aazim