Port challenges of edible oil and oil seeds

Pakistan’s palm oil import increased by 11 percent for 10MFY18, crossing $1.7 billion and will most likely exceeds $2 billion this year. That palm imports will continue to increase is not in dispute since Pakistan has invested almost next to no resources in developing the domestic edible oil and oil seeds industry.

In the absence of a local industry, it behooves the government to address the logistical issues of importing edible oil. From 2011 to 2015, average yearly import of edible oil stood at 2.5 million tons. In 2017, this number had jumped nearly 21 percent to 3.02 million tons. To transport this much quantity of oil requires roughly 145 tanker ships that involve about 12 shore terminals in receiving and storing cargo.

As the demand is likely to increase further, the existing cargo handling and storage facilities at Karachi and Port Qasim are likely to come under stress. The bulk of the edible oil cargo arrives at Port Qasim since it is has more advanced liquid cargo handling facilities and a liquid cargo terminal, while a very limited portion is handled by Karachi Port.

Pakistan Edible Oil Conference (PEOC) earlier this year highlighted the higher cost of edible oil transportation from Port Qasim terminals to industrial units throughout Pakistan. As fuel prices rise, the cost of transport increases which adversely impacts the ghee industry that is already suffering because of the Punjab Food Authority’s ban on manufacturing, sale and purchase of vanaspati ghee. (For more information read “Decline in ghee production”, published on March 28, 2018).

One solution proposed at PEOC was to transport edible oil in bulk through railways which was the case till 1995. Many ghee units in Punjab and KPK have railway sidings and decanting facilities while most ghee mills are near railway stations making this solution feasible.

Oil seed importers have their own set of woes. They face problems of congestion at Port Qasim which result in berthing delays of 8 to 10 days and result in demurrage expenses. Karachi Port has less of a congestion problem but its discharge ratio is comparatively less than Port Qasim which also results in demurrage costs.
In the short and medium term, it is extremely unlikely that Pakistan will develop a local edible oil sector. Since dependence on imports is expected to continue, storage and logistic issues need to be limited to ensure a smooth inflow of a vital product.