KARACHI: The State Bank of Pakistan (SBP) has suggested customs duty on imported seed and oil and taxes on ghee to encourage the cultivation of sunflower and rapeseed for domestic edible oil production aimed at reducing the import bill.
The State Bank in its first quarterly report has added a special section titled “Pakistan’s Rising Palm & Soybean Imports: Understanding the Drivers and Challenges to Domestic Oilseed Production”. This special section sheds light on the drivers of rising palm and soybean imports where growing demand pressures from inter alia increasing population, rising per capita consumption and gradual modernization of poultry industry has outpaced the domestic supply which has been eroding mainly on account of weak policy focus on oilseed crops.
According to SBP, Pakistan’s reliance on imports for edible oil and oilseed meals to meet domestic demand consumption has been increasing over the past two decades and currently, 86 percent of domestic edible oil consumption in 2020 came from imports compared to 77 percent in 2000.
Pakistan’s demand for edible oil also more than doubled in the last two decades from 2 million tons in 2001 to 4.7 million tons in 2020. At this rate, the demand for oilseed can be expected to rise significantly over the next 20 years, driven by rising population, and modernization of poultry, livestock and aquaculture industries to cater to exports and to meet rising domestic meat consumption.
According to the SBP, focus on canola and sunflower is an important solution for the short to medium term, considering the fact that sunflower and rapeseed/canola already have roots in the country.
In addition to focusing on sunflower and rapeseed/canola production in the short to medium term, the government may also consider gradual implementation of import and demand management measures, the SBP said.
“These include customs duty on imported seed and oil, and taxes on ghee aimed at encouraging sourcing of domestic sunflower and rapeseed for edible oil production, albeit price prescriptions are understandably complex, especially when domestic production is unable to meet local demand,” the report suggested.
Efforts to increase nutritional awareness may also help in reducing overall edible oil consumption in cooking. In the short to medium term, the SBP also suggested a policy focus on increasing the production of canola and sunflower is necessary, and currently in the process of being rolled out.
Over the long-term, there is an urgent need to invest in research, development, promotion, production and procurement mechanism for oil palm plantation and soybean crops. The urgency for long-term planning stems from the fact that significant breakthroughs and sufficient production of newly introduced crops requires comprehensive planning and execution spreading over years across various aspects of farming.
Moreover, under the federal government’s Agriculture Emergency Programme, a National Oilseed Enhancement Programme (NOEP) is in the process of being implemented in collaboration with provincial agriculture department with Pakistan Oilseed Department as execution agency.
Key measures planned under the five-year NOEP are: productivity enhancement of wheat, rice and sugarcane to vacate up to 3.25 million hectares of land for the cultivation of canola, sunflower and sesame; increasing the yield and area under acreage of cotton to produce 15 million bales, which will increase the supply of cottonseed oil; and increasing the yield of sunflower and canola.
According to the SBP, by achieving the target of 15 million bales in next five years, 0.459 million tons of cottonseed oil will be produced. Similarly, other cultivation related measures under the NOEP are expected to yield another 2.8 million tons of edible oil. This is expected to reduce import bill of edible oil by $ 584 million.
National Food Security Policy 2018 had also proposed reducing area under rice, sugarcane and other crops to increase production of oilseeds, pulses and horticulture, and introducing support price for oilseeds to promote import substitution rather than subsidizing export of wheat and sugar.
However, given Pakistan’s rising demand outlook over next 20 years, investments to increase production of sunflower, canola and cottonseed oil should not be expected to contribute significantly to the country’s needs in the long-term.
The oil and protein yield per hectare of canola, sunflower and sesame are significantly lower than that of palm and soybean, which is an important consideration in light of scarcity of land, water and other resources. Accordingly, the production efficiency of oil palm and soybean have made these the most consumed crops in the world as both oils and meals.
These aspects include research on seed and soil; seed availability; farmer awareness and profitability; agriculture extension; effective farm machinery; farm machinery; and establishment of efficient and reliable procurement and supply chain. In other words, any new crop has to be made successful to attract farmers’ interest for long-term organic growth of the crop production. Agriculture production policy depends on a variety of complex and interwoven factors.
These include nutritional requirements; diverse agro-ecological zones and production systems; climate, soil, water and other sowing conditions; and dietary preferences, which are also affected by culture and history. These factors imply that no country can become completely self-sufficient in all agriculture commodities, nor can any country grow all the crops it consumes.
While being cognizant of these factors, the realities of growing edible oil imports warrant concerted deliberations among federal and provincial governments, and related stakeholders from private and public sector to assess whether or not Pakistan has the potential of growing palm and soybean.
If indeed there is potential to grow palm and soybean, then unlike attempts in the past, consistent policy and institutional support needs to be provided to make that transition successful.
Copyright Business Recorder, 2022