In defiance of Pakistan being an agricultural country, it has surprisingly become the fourth-largest importer of edible oil globally. The fiscal year 2021-22 witnessed an import bill of $4.5 billion, primarily driven by increased consumption and fluctuations in the international edible oil market. Over the past two decades, Pakistan’s imports of edible oil have grown at an annual rate of 12.3%, resulting in a staggering 398.7% increase in the import bill by 2020.
The import bill rose from $615 million in 2006 to $3.068 billion in 2020. Moreover, the State Bank of Pakistan reported a 47% increase in the import bill on a year-on-year basis in the fiscal year 2021. Palm oil and soybean oil are the major imports for Pakistan, along with some oilseeds such as soybean, canola, and sunflower seeds. Palm oil imports dominated the import bill, costing $2.44 billion in the FY 2021. In terms of quantity, oilseed and related products surpassed 7 million metric tons in the fiscal year 2021, with 87% consisting of palm and soybean oil, and the remaining 13% comprised of rapeseed, sunflower, groundnut, and other related seeds.
In Pakistan, 96% of the edible oil is consumed by food industry, commercially and domestically. Per capita consumption in Pakistan is around 24kg, higher than India and Sri Lanka, which is largely responsive to rising GDP. It is worth noting that transformation in dietary practices have decreased use of hydrogenated products, but starkly increased oil usage.87% of which is imported palm and soybean oils. Pakistan imports 75% of its palm oil from Indonesia and 25% from Malaysia, under the Preferential Trade Agreement (PTA) and Free Trade Agreement (FTA) respectively.
According to trade map, the global average per ton cost of palm oil is US$ 1050, which makes it the cheapest of the edible oils. Figure 2, illustrates sudden surge in import bill in 2011 and onwards, mainly due to Indonesia’s crude oil export discouragement policy and imposing $20-25/ton export duty. Similarly, US-China rivalry also impacted the international palm oil market, where US reduced the trade of soybean oil with China, eventually opening space for Indonesian palm oil to fill in, resulting in increased demand and subsequent price hike.
Therefore, to avoid the uncertain international edible oil market and related hiked import bill and widening balance of payment gap, Pakistan must utilize its domestic edible oil production potential. Over the past two decades, Pakistan has witnessed a gradual decline in domestic production of edible oils, where it was 0.642 MT in 2000-01 and 0.431 MT in 2017 but positive changes have been observed since the initiation of the Punjab Oilseed Promotion Initiative in 2017-18. Notably, mustard and its varieties have emerged as a replacement of imported palm oil and the second-largest source, contributing approximately 38% of the country’s edible oil production.
Mustard is known for its high oil content, ranging from 40% to 44%, making it an attractive option. Cottonseed, the primary contributor at 52%, is often blended with other oils due to its low oil content and higher saturated fats. Currently Pakistan has 585.50 Hectares mustard cultivated land, with the production of 17.16 mund/acre in most parts of Pakistan. Mustard and Rapeseed contribute 32% of the total domestic oil produce. Although Mustard/Rapeseed contain higher Euric content, but with the introduction of canola varieties of the crop, health profile of the crop has been enhanced. Despite aforementioned positives, the crop still experiences multiple bottlenecks to increase in production.
Predominant challenge to mustard cultivation in Pakistan is competition with wheat over land. Wheat being a staple and highly demanded cash crop is preferred over Mustard, given their overlapping sowing time, between September and October. Around 40% of cultivated land in Pakistan is consumed by wheat, i.e. around 9 million Hectares, whereas mustard is generally grown over marginal lands, with lower availability of water and fertility. Oil seed crops are undervalued due to their non-cash crop status, In the year 2023, the prices ranged from 9000 to 11000 PKR in Chakwal, Faisalabad, Attock and other regions of Punjab (Chakwal mustard/Rapeseed and canola are considered to be of high yield, and such seed type is provided to farmers for better yield across Pakistan). A notable bottleneck is the absence of organized processing and crushing facilities.
The existing crushing facilities in Pakistan primarily comprises local kohlloos, in villages. In contrast, high solvent extractors employ advanced extraction technologies, with production capacity of approx. 4-4.5 MT oil. Pakistan Oilseed Development Board (PODB), indicated that 46.5% of oil production is through kohlloos, with minimal yield of 0.10MT. Moreover, gap between farmer and extractor also hinders the oilseed production, indicating that improved extraction methods and a stronger market presence for oil products can yield greater efficiency.
On demand side, the presence of strong Sulphur smell and euric acid associated cardiovascular diseases, mustard is not preferred. To address this, imported canola varieties were introduced in 2005-2006. Initially canola production remained low but since the introduction of Pakistan’s first indigenous canola variety, AARI Canola in 2016, there has been a substantial increase in yield. Canola being GE mustard holds health benefits and similar production coast, can serve a low-cost alternative to expensive imported oils. Retail competition is another impediment in mainstreaming canola as there exists price difference of approx. PKR 100 between palm and canola oils. Consequently, market dynamics prioritize price considerations over the health benefits associated with the product. Such decreased production and the prospects of increasing demands, a large-scale initiative is needed, drawing its roots in Pakistani households to a policy captivating the growers. Following practices can help discourage imported edible oils and route self-sufficiency in edible oils.
- Given the minor household usage, a mass awareness campaign through, electronic and print media is necessary, including dieticians and cooking experts inducing towards the benefits of mustard and specifically canola oils. Branding of mustard/canola oils be undertaken, and a retail policy be devised over percentage allocation to different oils in the market for consumers.
- At stage two, mustard/rapeseed and canola farming should be encouraged through the introduction of farmer friendly policies. Centered on sustainable and longer term mustard production, since the subsidies provided on crops prove fugacious. Therefore, to increase the cultivating land, concept of Zoning be adopted, where Zones specify the geographically proximal region specified for growing specified crop. In addition cluster based approach be adopted to analyze climatic, soil and marketing contingencies needed before consideration of any agriculture supportive policy.
- Shaving some land off the Wheat cultivated areas, can also be considered. Given the per acer yield of mustard to be 17.16 an impactful contribution can be expected from 0.5 Million Ha. In this regard, intercropping with Wheat and Sugarcane should be deliberated to enhance production. There exists a possibility of increasing oilseed production up to 34.41 % of the domestic needs using additional area from wheat and sugarcane.
- Value added agriculture in oilseeds be promoted by the government to incentivize farmers and attract Mustard/Canola cultivation.
- Furthermore, farmer’s confidence over his crop be increased through introducing market friendly Minimum Support price (MSP) for Mustard/ canola.
- Additional attention be laid to research and development (R&D), hybrid and genetically engineered GE Rapeseed/mustard and specifically Canola seeds with greater yield and health benefits and climate resistance. Furthermore, seed provision be strictly monitored and high yield seeds be made available through government and private research institutes.
- Import of low quality edible oil should be tariffed 5-10% more. Similarly, policy interventions conditioning importers to develop and procure equal or substantial quantity of locally produce edible oil or oil seed should be undertaken.
- Government should undertake the establishment of efficient extraction facilities near the farm areas, thereby decreasing reliance on production deficient Kohloos.
- Additionally, projects of soya bean, sunflower and good palm oils should be undertaken (as pilot project of palm oil in Thatta, 2016) as a step towards self-sufficiency in edible oils. Corporate farming can also be considered to incentivize regular and sustainable production of mustard/Rapeseed/Canola oil.
