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The vegetable oil industry in Pakistan

Article · August 2005

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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)
Pakistan is world’s fourth largest edi-
ble oil importer and its import bill is second
to that for petroleum imports. In order to save
the huge demands on foreign exchange for
the import of vegetable oil, there is strong
need to accelerate efforts in the agriculture
sector to steadily increase the local pro-
duction of oilseeds.
Pakistan usually maintains sufficient
stock of oils and fats to supply the coun-
try’s requirements for 6-8 weeks. Most of
these stocks are stored at the Karachi ports
of Keamari and Qasim. Some stocks of
vegetable oils, particularly the seasonal
oils, are maintained within the industry. A
new seaport has been under construction
over the last two years at Gawadar with
the expectations that new extraction, crush-
ing and processing plants will start oper-
ating shortly.
Consumption
The Pakistani population on average gets
18–20% of calories from dietary oils with
the total average intake of 2400 calories per
day. Traditionally, the consumption of dietary
oils in the country has been in the form of
semi-solid fats, i.e. vanaspati.
Previously, the consumption of liquid
cooking oil was small. However, over the
last 10-15 years, there has been a shift in the
consumption pattern from solid fats to liq-
uid oils. Initially, it was slow and the liquid
oil consumption has been around 10%. Lately,
this has picked up momentum, particularly
for the urban areas. In the year 2003, the
national average for liquid oil consumption
stood at 25% and semi-solid fat (vanas-
pati) at 75%. Sector-wise in urban areas, the
liquid oil consumption ratio stood at 40%
and the balance 60% for semi-solid fats.
Whereas for rural areas the ratio stood at 10%
for liquid oils and 90% for semi-solid fats,
this trend of shifting toward liquid oil con-
sumption will continue in the future and may
reach 50:50. Some of the factors behind this
shift in consumption pattern are:
■ Health and nutritional awareness among
general public
■ Electronic and print media projection for
liquid oils
■ Increasing local availability of sunflower
and canola oils
■ Improved packing and safe transporta-
tion of liquid cooking oils for small towns
and villages
Pakistan’s refining industry
The infrastructure of the vegetable oil refin-
ing industry of Pakistan is relatively large
View publication stats
ECONOMICS & WORLD TRADE 527
(see Table 1) and has excess installed refin-
ing capacity, most of which is based on tra-
ditional batch type processes of caustic soda
refining. Therefore this industry is not effi-
cient and ought to be upgraded through
the introduction of modern refining and mod-
ification technologies. This will enable
the industry to produce value-added func-
tional oils and fats with better performance
and profitability prospects.
Nationalization of industries in the
1970s had severely affected the vegetable
oil industry. Then in the early 1990s, the
government privatized the refining indus-
try. The public sector of Ghee Corporation
of Pakistan (GCP) has now been disbanded.
The government, as a matter of policy, has
also introduced and followed a stable import
tariff regime. Consequently, the refining
industry in the private sector has improved
its working efficiency in a fair but com-
petitive environment.
The refining of crude palm oil has been
encouraged through favorable import tariff
on crude palm oil. This factor alone has
encouraged the setting up of a physical refin-
ing industry in the country. Two physical
refining units are already working whereas
others are in the offing. With this trend, it is
envisaged that within three years, Pakistan
will have a crude palm oil refining capacity
through physical means exceeding 1.5 MMT.
The processing of refined vegetable oils into
value-added functional fats is largely depend-
ent on consumer needs, purchasing power
and the development of allied food indus-
try in the country.
The future
In view of the above discussion, the follow-
ing scenario is envisaged for the vegetable
oil industry of Pakistan:
■ Domestic oilseeds production program
is not going to make substantive head-
way. The only possibility is for the expan-
sion of the sunflower crop. Canola may
gradually substitute the traditional rape/
mustard crop. At the maximum, Pakistan
may retain current self-sufficiency level
at 25% for its vegetable oil needs.
■ Solvent extraction industry of Pakistan
is poised for growth, which will result in
an increased import of oilseeds. However,
for long-term, sustained growth this indus-
try ought to integrate and grow in tandem
with the animal feed industry.
■ Vegetable oil refining industry is likely
to face difficult times. Possibly, the inef-
ficient and small units will close down.
Only the big ones with higher volume
turnover and established brands will remain
in business. The physical refining indus-
try will expand, particularly at the Port
Qasim industrial area of Karachi. This
development will be accompanied by the
import of crude palm oil as replacement
for RBD (refined bleached deodorized)
palm oil products
■ Edible oil industry will import increas-
ing quantities of palm oil to produce value-
added industrial and functional fats for
local and export markets.
■ Downstream palm oil processing joint
venture projects will benefit the country.
Pakistan and the neighboring markets
offer scope and potential of investment
for fractionation and fat splitting opera-
tions.
■ Consumption pattern for dietary oils will
further tilt towards liquid oils and might
reach 50%. As the country’s economy
improves the per capita consumption of
edible oils is likely to increase further by
2–3 kg and it may reach 19–20 kg.
■ Increasing awareness about health haz-
ardous effects of trans fatty acids present
in hydrogenated vegetable oil including
vanaspati products will result the shift in
consumption pattern to liquid cooking oils.
Acknowledgement
The authors deeply acknowledge Mr. Iftikhar
Ahmed, Director, TAPAS, for his valuable
discussions during the preparation of this
article.
Shahid Iqbal, S.T.H. Sherazi, and M.I.
Bhanger are with
the National Cen-
ter of Excellence
in Analytical Chem-
istry, University of
Sindh, Jamshoro-
76080-Pakistan.
Contact them
by phone: +92-
333-2656248;
or fax:+92-221-
771560. ■
M.I. Bhanger
S.T.H. Sherazi Shahid Iqbal