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The vegetable oil industry in Pakistan

Article · August 2005

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Shahid Iqbal Syed Tufail Hussain Sherazi

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 526 ECONOMICS & WORLD TRADE inform • August 2005 • Volume 16 (8)

The vegetable oil industry in Pakistan

Shahid Iqbal, S.T.H. Sherazi, and M.I. Bhanger

P akistan is an agricultural country with

a population of 155 million. The lat-
est recorded population growth rate is 2.1%,
the highest among neighboring countries,
and makes the country the seventh most pop-
ulous in the world. The high population growth
rate is a matter of concern to the country’s
economic planners as economic growth and
development have not been able to cope.
Approximately 70–80% of Pakistan’s pop-
ulation lives in rural areas and is directly or
indirectly linked to the agricultural sector.
In spite of valuable improvement in the
country’s economy, Pakistan still is unable
to produce sufficient edible oils for domes-
tic requirements and substantial amount of
foreign exchange is being spent on the import
of vegetable oils. In Pakistan the total con- A DeSmet oil refinery plant with 500 MT/ day processing capacity at installation at
sumption of vegetable oils is 27.73 million Habib Oil Mills, Karachi, Pakistan, shifting from batch process to continuous process.
metric tons (MMT). This amounts to per capita
consumption of 19.5 kg for both edible and
The main contribution comes from cot- figure for production of sunflower, canola
inedible purposes. According to industry
tonseed. Although the domestic cotton crop and rapeseed are 3.46 MMT, 1.59 MMT and
sources, approximately 2.5 kg per capita con-
is mainly grown for lint, it contributes over 2.38 MMT, respectively. The oil content in
sumption was for inedible purposes, mainly
70% of local edible oil production as a by- cottonseed is 12-15%, while it is 32-35% in
for soap. The balance of 17 kg was used for
product. The total annual production of cot- rapeseed and is as high as 37-42% in sun-
edible purposes. This per capita consump-
tonseed is around 34.16 MMT whereas the flower. In spite of the fact that the size of the
tion level of 19.5 kg for edi-
domestic cotton crop has
ble oils and fats in Pakistan
shown substantial increase
is relatively high compared
Pakistan oils & fats at a glance over the last 50 years, the
to its neighboring countries
availability of cottonseed oil
and also higher than the ■ Population 155 million remains far below the domes-
world’s average of 18 kg. ■ Self-sufficiency ration in oils & fats: tic requirement of the grow-
Domestic production of Imported oils & fats 61% ing population.
various vegetable oils is around Oils from Imported Oilseeds 14% Genetically modified
6.86 MMT per annum and Oils from Indigenous Seeds 25% oilseeds have attracted world-
therefore the shortfall of 20.87 Consumption pattern for edible oils wide attraction in the past
MMT has to be met through
Liquid Oil Semi Solid fat decade. Presently the culti-
imported vegetable oils and
vation of GM crops is not
oils extracted from imported Rural Areas 10% 90% approved by the government
oilseeds. At present, the local Urban Areas 40 60 of Pakistan. In view of
oil production caters to only National Average 25 75 increasing demand of veg-
25% of the requirement while
■ Per capita consumption of oils & fats etable oil, however, GM
75% is still dependent upon
Total 19.5 kg oilseed crops might indeed
imported vegetable oils. The
Edible 17.0 kg be considered as an effective
local production of vegetable
Inedible 02.5 kg alternate for their improved
oil is being contributed from
yield and quality aspects com-
both domestically produced ■ Energy intake per day 2400 calories pared to conventional oilseeds
oilseeds as well as imported ■ Contribution of calories from dietary oils 18-20% in Pakistan.
oilseeds.
 inform • August 2005 • Volume 16 (8) ECONOMICS & WORLD TRADE 527

Pakistan is world’s fourth largest edi- (see Table 1) and has excess installed refin- in business. The physical refining indus-
ble oil importer and its import bill is second ing capacity, most of which is based on tra- try will expand, particularly at the Port
to that for petroleum imports. In order to save ditional batch type processes of caustic soda Qasim industrial area of Karachi. This
the huge demands on foreign exchange for refining. Therefore this industry is not effi- development will be accompanied by the
the import of vegetable oil, there is strong cient and ought to be upgraded through import of crude palm oil as replacement
need to accelerate efforts in the agriculture the introduction of modern refining and mod- for RBD (refined bleached deodorized)
sector to steadily increase the local pro- ification technologies. This will enable palm oil products
duction of oilseeds. the industry to produce value-added func- ■ Edible oil industry will import increas-
Pakistan usually maintains sufficient tional oils and fats with better performance ing quantities of palm oil to produce value-
stock of oils and fats to supply the coun- and profitability prospects. added industrial and functional fats for
try’s requirements for 6-8 weeks. Most of Nationalization of industries in the local and export markets.
these stocks are stored at the Karachi ports 1970s had severely affected the vegetable ■ Downstream palm oil processing joint
of Keamari and Qasim. Some stocks of oil industry. Then in the early 1990s, the venture projects will benefit the country.
vegetable oils, particularly the seasonal government privatized the refining indus- Pakistan and the neighboring markets
oils, are maintained within the industry. A try. The public sector of Ghee Corporation offer scope and potential of investment
new seaport has been under construction of Pakistan (GCP) has now been disbanded. for fractionation and fat splitting opera-
over the last two years at Gawadar with The government, as a matter of policy, has tions.
the expectations that new extraction, crush- also introduced and followed a stable import ■ Consumption pattern for dietary oils will
ing and processing plants will start oper- tariff regime. Consequently, the refining further tilt towards liquid oils and might
ating shortly. industry in the private sector has improved reach 50%. As the country’s economy
its working efficiency in a fair but com- improves the per capita consumption of
petitive environment. edible oils is likely to increase further by
Consumption The refining of crude palm oil has been 2–3 kg and it may reach 19–20 kg.
The Pakistani population on average gets encouraged through favorable import tariff ■ Increasing awareness about health haz-
18–20% of calories from dietary oils with on crude palm oil. This factor alone has ardous effects of trans fatty acids present
the total average intake of 2400 calories per encouraged the setting up of a physical refin- in hydrogenated vegetable oil including
day. Traditionally, the consumption of dietary ing industry in the country. Two physical vanaspati products will result the shift in
oils in the country has been in the form of refining units are already working whereas consumption pattern to liquid cooking oils.
semi-solid fats, i.e. vanaspati. others are in the offing. With this trend, it is
Previously, the consumption of liquid envisaged that within three years, Pakistan
cooking oil was small. However, over the will have a crude palm oil refining capacity
Acknowledgement
last 10-15 years, there has been a shift in the through physical means exceeding 1.5 MMT. The authors deeply acknowledge Mr. Iftikhar
consumption pattern from solid fats to liq- The processing of refined vegetable oils into Ahmed, Director, TAPAS, for his valuable
uid oils. Initially, it was slow and the liquid value-added functional fats is largely depend- discussions during the preparation of this
oil consumption has been around 10%. Lately, ent on consumer needs, purchasing power article.
this has picked up momentum, particularly and the development of allied food indus-
for the urban areas. In the year 2003, the try in the country. Shahid Iqbal, S.T.H. Sherazi, and M.I.
national average for liquid oil consumption Bhanger are with
stood at 25% and semi-solid fat (vanas- the National Cen-
pati) at 75%. Sector-wise in urban areas, the The future ter of Excellence
liquid oil consumption ratio stood at 40% In view of the above discussion, the follow- in Analytical Chem-
and the balance 60% for semi-solid fats. ing scenario is envisaged for the vegetable istry, University of
Whereas for rural areas the ratio stood at 10% oil industry of Pakistan: Sindh, Jamshoro-
for liquid oils and 90% for semi-solid fats, ■ Domestic oilseeds production program 76080-Pakistan.
this trend of shifting toward liquid oil con- is not going to make substantive head- Contact them
sumption will continue in the future and may way. The only possibility is for the expan- by phone: +92-
reach 50:50. Some of the factors behind this sion of the sunflower crop. Canola may 333-2656248;
shift in consumption pattern are: gradually substitute the traditional rape/ or fax:+92-221-
■ Health and nutritional awareness among mustard crop. At the maximum, Pakistan 771560. ■
general public may retain current self-sufficiency level M.I. Bhanger
■ Electronic and print media projection for at 25% for its vegetable oil needs.
liquid oils ■ Solvent extraction industry of Pakistan
■ Increasing local availability of sunflower is poised for growth, which will result in
and canola oils an increased import of oilseeds. However,
■ Improved packing and safe transporta- for long-term, sustained growth this indus-
tion of liquid cooking oils for small towns try ought to integrate and grow in tandem
and villages with the animal feed industry.
■ Vegetable oil refining industry is likely
to face difficult times. Possibly, the inef-
Pakistan’s refining industry ficient and small units will close down.
The infrastructure of the vegetable oil refin- Only the big ones with higher volume
ing industry of Pakistan is relatively large turnover and established brands will remain S.T.H. Sherazi Shahid Iqbal

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