I have been associated with Ghee and Vanaspati Industry since 1965 when I joined one of the leading manufacturers of ghee/vanaspati in Karachi and subsequently became the Chairman of Pakistan Vanaspati Manufacturer Association (PVMA) and represented the Industry and the government in various Conferences and in edible oil deals.
When Pakistan came into being there were very few Oil/Ghee Mills in Pakistan and mostly they were crushing Cotton Seed in an orthodox fashion and producing Oil and then hydrogenating it through local machinery. There were few small organized Oil and Ghee manufacturers in Pakistan and most of the oil/ghee was coming before partition from India mainly from Bombay, Okha, and Calcutta and through Amritsar. The Gasnesh Oil Mills in Faisalabad (previously Lyallpur) was established before partition by Delhi Cloth Mills and was producing Vanaspati Ghee.
Need of the growth of Edible Oil Industry was realised in 1947 when a few businessmen who migrated to Pakistan, established a small Vanaspati Unit near Custom House Karachi called Bengal Oil Mills. The Unit was inaugurated by Quid e Azam Muhammad Ali Jinnah at the end of 1947. Bengal Oil Mills started processing Cotton and Rapeseed Oil to produce Cooking Oil. The Rapeseed at that time was exported in big quantities in drums to the then East Pakistan. In 1960 Bengal Mill added a Unit to produce Vanaspati Ghee by Hydrogenation.
In Punjab, Sheikh Fazal Ur Rehman was the first to take initiative to put up an Oil Mill and finally a Vanaspati Plant. Haji Sahib, the Chairman of Sheikh Fazal Ur Rehman Group was blind, however, he had great capability of telling how much a seed has the oil content. He started Sheikh Fazal Ur Rehman Ghee Mills in Faisalabad and was one of the top Cottonseed Oil Crushers and Vanaspati Manufacturers.
Unilever, formally Lever Brothers, had a factory in Karachi which started production in the 1950s. There was Sadiq Soap and Oil Mills in Rahim Yar Khan which was a small outlet but on a huge area. Unilever took over this Unit in early 50s and started production of Dalda in a big way. Dalda was very popular brand since the pre-Partition days as it had Units in Bombay and in the other parts of India and has huge distributions system, which still continues. Dalda is still top brand of Pakistan.
Hyderabad Khopra Mills was established before partition for crushing Khopra and Cottonseed Oil. The Packages Group of Lahore took over this Industry in 1954 and named it Wazir Ali Industries and established a very popular brand 'TULLO', which still continues as a popular brand.
The industry started growing and the partners of Bengal Oil Mills separated in 1960 and Burma Oil Mills was established in West Wharf Karachi. Burma Oil Mills produced 'BANO' and 'BAHAR' Banaspati which were very popular. New entrepreneurs came in and following Mills were added in Sindh. Burma Oil Mills Limited, Bengal Oil Mills Limited, Asif Ghee Mills, Wazir Ali Industries, Hyderi Ghee Mills, E. M. Oil Mills, A&B Oil Mills, Maqbool Company Limited.
In Punjab the speed was fast and most of the Oil / Ghee were produced from Cottonseed. Many Mills started their operations as Expellers, Extractors and then to Vanaspati. When I became the Chairman of PVMA in 1969, there were 24 Units operational, a list of which is given hereunder:
Burma Oil Mills Limited, Bengal Oil Mills Limited, Asif Ghee Mills, Wazir Ali Industries, Hyderi Ghee Mills, E. M. Oil Mills, A&B Oil Mills, Maqbool Company Limited, Kohinoor Oil Mills Limited, Suraj Ghee Mills, Sheikh Fazal Ghee Mills, Fazal & Sons Vegetable Oil Mills, Sargroh Oil Mills, A&B Oil Mills (Multan), United Ghee Mills Limited, Morafco Ghee Mills, Punjab Oil Mills, Crescent Oil Industries, Universal Oil Mills, Hilal Oil Mills, Kaka Khail Oil Mills, Associated Industries Limited, Dargai Oil Mills, Chiltan Ghee Mills.
The import of Edible Oil started in Pakistan when the United States Government gave PL480 Aid to Pakistan Government which was receiving free Soy Oil from the USA but they had to pay for the freight and other charges. The Government called PVMA and asked them to start buying Oil under PL480 which was to be given to the Ghee Units at the International Price at that time of Soybean Oil plus freight. PVMA evolved a system whereby once joint purchases were made by the Association on behalf of whole industry and it was distributed to all ghee units to Pakistan.
This was a unique system as all buying was done under one license given to PVMA and Association formed a negotiating committee of five members including myself to purchase and make arrangements for shipments. When the business became lucrative and Cottonseed Oil was not sufficient the pressure came on imported Soy Oil of PL480 and all the units wanted an increase in their quotas. The Ministry of Industries, Government of Pakistan in 1968-69 decided to assess the capacity of each unit so as to allocate oil accordingly. Capacities of the ghee units were fixed by the government by a thorough survey of machineries in factories.
As Chairman of PVMA, I had to play the role to strike a delicate balance between all Industries and also to communicate with the government. The Government then imposed a capacity tax on the import of oil which finally became import duty. PL480 has lots of interesting stories and a lot of handling work to be done and the negotiating committee was formed consisting of myself, Chairman of Lever Brothers at that time Mr Chambers, Mr Zaka Rahmatullah of Wazir Ali Industries, Mr Hanif Muggo from United Industries, Mr Gul Muhammad from Associated Industries and one more gentleman from Punjab side. It was a great challenge that in the limited time given to PVMA to buy the Oil and negotiate the price which was though free but still had to be documented and also to arrange the freight. Though Pakistan Government used to get oil free under PL 480 but it was passed to Industries at market price.
In one case allocation was given to us on 17th December and we were asked to ship the oil by 31st of December as allocation was to expire by that time. I was asked by the government to fly to the United States with the Secretary of PVMA of that time Wing Commander A. Habib Ahmed to New York and Washington to buy and finalize the import.
The biggest sellers to Pakistan at that time were Bunge Corporation, Continental Grains and Cargill. When we reached New York unfortunately my colleague Wing Commander Habib Ahmed caught Hong Kong Flu and was hospitalized. I went to all these three sellers who welcomed me but gave me a price which was almost US $50/- higher than the market and when I compared the price it was very clear that they had combined together to sell this quantity of 30,000 MT to Pakistan at the same price.
Communication at that time was very difficult. I sent a message through Pakistan Embassy to the Secretary Commerce at that time Waqar Ahmed that the prices they are charging are too high and availability of the ships are very limited and to allow me to go to Washington and get extension for shipment.
I got the message that United States may not give the extension and therefore I should negotiate the price and ship the oil. I found myself in a very embarrassing situation and decided to go on my own to Washington to meet the US State Department officials. I took the help from Pakistan Embassy and the Second Secretary went along with me. The lady in-charge at Pakistan Desk gave me an appointment to see her at 7.30 early morning, so I flew from New York to Washington at night and went to the US State Department at 7.00am along with the Second Secretary. I explained to the lady in-charge that the sellers are asking for the price which is exorbitant. Fortunately she did not argue that it was free oil to Pakistan Government but she said that it will be difficult to extend the time limit.
Meanwhile, I also received a quotation from Universal Transport Corporation from its Managing Director, Bert Wagonburg. He was a good friend of Pakistan and gave me a price of US $62 as freight from New Orleans to Karachi. The freight was way out of line and running rate was about US $35. Further, the ship nominated was also more than twenty years old. I showed the price trend from the Chicago Sun-Times which publishes oil prices every day and argued that a poor country like ours had to pay such an unbelievable price which will reduce the quantity of Aid given by the United States Government and also defeat the purpose.
She asked me to see her at 4 O'clock in the evening and went to the Embassy and paid a courtesy visit to the High Commissioner and at 4 pm went to the State Department and was informed by the lady that she is sorry that the official extension cannot be provided as today is 22nd December and her head of department was on Christmas leaves. I was at that time 28 years old and she looked at my gloomy face and asked me how old I am. I told her my age and she said that she is surprised that I am fighting for penny which my Government had accepted with all the conditions and has not objected anything officially. I told her it is my duty to protect the interest of my Country in terms of price which will ultimately reduce the quantity if we pay a higher price.
She asked me how much extension I require and I told her that 15 days at least, ie, up till 15th January. She after considerable thought gave me a verbal extension and said that she cannot give anything in writing for the reason she had mentioned earlier. I said that if I will not have anything in writing how am I going to convince my Government and the Sellers. She said as far as the sellers are concerned you have to play hide and seek. I left the place thanking her for her help and asked her if I can see her again on 28th December ie after Christmas so that she is in a position to issue a written confirmation of extension.
I went back to Pakistan Embassy and requested them to send message to the Secretary Commerce about the verbal extension. The High Commissioner refused to send the message as it was a verbal commitment and same may not be communicated to the Government. He advised that I should buy at whatever price they are offering and ship it. According to him no one will appreciate my efforts and if in case things are going to get wrong, I will be blamed for everything.
After this I left the Embassy and booked a call myself for Secretary Commerce and Joint Secretary Industries Dr F. A. Rabbani at about Midnight. I got the call but the Secretary Commerce was not in his seat, however Rabbani took the call and I explained to him the whole scenario. He promised that he will come back to me after speaking with the Secretary Commerce. I waited the entire night for a response but no call was received. I had to fly back to New York to see the sellers again.
I sent a telex to my office in Karachi and explained to them the situation and asked them to speak with Islamabad to get me instructions. Fortunately Imtiaz Mehdi of Wazir Ali Industries was in Islamabad that day. He communicated my message to Secretary Commerce but no positive or negative answer was received.
It was now 24th December and all offices were getting closed due to Christmas. Three of the sellers and Universal Transport who were to arrange the freight were after me to finalize the deal stating that if I will wait till after the X-Mas holidays PL480 will expire and I will be blamed for it. I kept quiet and passed the worst day of life on 25th December. I spent the entire day in hotel in a dim light and with a freezing temperature.
While all the offices were closed on 26th December, three sellers visited my hotel and informed me that there is a ready vessel and I must hurry to sign the contract. They also took me out for the lunch which was indeed a blessing. I told them that even if my Government would like to buy on these numbers I would not agree as the prices are exorbitant. They offered me US $10 PMT discount if I agree to sign the contract immediately. Meanwhile I was told by the ship broker that the sellers have their tanks full and the vessel is around to load and that they have already sent a message through telegram to the Government of Pakistan that I am getting stubborn. After the lunch they wanted my reply that though the offices are closed they would even sign the contract for 10,000 MT each and Mr Bert will sign the Charter Party. I took off from there saying that I will once again try to speak with the Government and will come back to them.
On 27th the sellers and the ship broker were trying to reach me but I had placed myself in National Bank at the Wall Street so that I can write a comprehensive report on PL480 for the Pakistan Government as well as for the State Department.
On 28th early morning I went to see the Lady in-charge of PL480 at 7 am with a small gift of chocolates. I was informed that she will only come at 10 am. I waited for her for three hours. Upon her arrival I wished her 'Merry Christmas' greeting and she took me into her office. She asked me how I spent my Christmas. I told her that I had spent the days alone as I do not have any person known to whom I can visit and spent my few hours in bar drinking soda. Upon her query I informed that I had informed my government about the verbal commitment and the non issuance of letter in writing due to Christmas holidays.
She said she was contacted by the sellers and she informed them that PL480 might be extended without giving any further date of expiry which might help me to bring the sellers on the negotiating table. Upon my request she gave me a two liner letter of extension upto 10th January. I thanked her for all her cooperation and assistance.
Finally I went to New York and negotiated with the sellers at the market price plus premium of US $5/- as it was PL480 and also negotiated with the Ship Broker at US $42/-. During this episode my colleague Commander Habib had still not recovered and was with his brother Agha Hameed who was working with United Nations.
After spending worst days of my life in New York, I flew to London and came back to Karachi. The ghee industry in Pakistan was flourishing well and 24 units were setup and there was a healthy competition in the ghee industry and the prices were under control as well. The Ghee Mills were paying duty taxes etc and were very well organized.
In November 1972 there was a shortage of Edible Oils in Pakistan as Cottonseed crop had not arrived as expected and because of the funds constraints the imports were very limited. Further a licence was not granted for the import to PVMA. I was told by the Chairman Trading Corporation of Pakistan (TCP), Riaz Naik, that the Government of Pakistan has got the allocation to buy Butter Oil from the European Commission and we should try to buy Butter Oil urgently and ship it so that there is no shortage of Ghee.
Myself and Riaz Naik flew to Brussels in December and started negotiating for an early shipment. After three-four days while we were in Brussels, I got a call from Gul Muhammad of Associated Industries that the Bhutto government has nationalized all the Ghee Units in Pakistan. We decided to come back and took a flight to London and then to Karachi.
Nobody had a clue to possible reasons behind government's decision to nationalize Ghee Units. But all the owners of Ghee Industries were in a state of shock when I came back. My office room was also sealed and I was asked to stay outside and in the presence of officials my room was opened and I was summoned by the in-charge of the Oil Mills to give a lot of explanation on the finance and other aspects of the industry.
Till today no one understands the rational why the Vanaspati Industries were nationalized and what prompted Zulfiqar Ali Bhutto for such action as the Vanaspati Industries was neither in limelight nor was it a huge industry, there was no issue of prices increase or any shortage of Ghee in the market. Though, later on small industries like ginning and other were also nationalized. No one had questioned it as it was done under a legal cover. Hence it was not possible to go to the Court of Law. Some of the Ghee Manufacturers had their residences in their Industry premises and they faced big problems of shifting or getting permission from the Government to stay in their houses. Few owners also had their valuables and important papers locked in the Units which were ultimately not retrieved. Fortunately, my liaison with government officials was cordial and I was able to solve problems of many industries in those difficult times, and visited all nationalized unites. I travelled to Hyderabad, Faisalabad, to solve problems between officials and ex owners.
I was called by one of the advisors of Bhutto in Islamabad and I was told that the government is forming a corporation to run all the ghee units which were nationalized. I was asked to become Chairman of this new corporation. It took me a lot of time to explain it to them that neither I was capable or fit for this job nor it was it possible to take the offer. Wazir Ali was the Chairman of TCP at that time knew me very well and explained to me that he can be a part of the team with few other bureaucrats to run this Corporation. I was interviewed by the then Finance Minister whom I explained my position and regretted. He asked me for name and I gave the name of Habib Ur Rehman that time Director of Lever Brothers. To my best of knowledge Habib Ur Rehman took over as Chairman for a short period and finally it was run by bureaucrats as expected. The Corporation later became Ghee Corporation of Pakistan.
The nationalization of Vanaspati Industry and other industries taken over did not translate into a wise move. The government revenue decreased, the production also decreased, the prices of ghee increased and country as a whole suffered. The Vanaspati Industry was ultimately denationalized and today Pakistan Edible Oil and Vanaspati Industry has seen a tremendous growth in last two decades in private sector.
There are today more than 120 Ghee Units in Pakistan The import of Edible Oils per annum (Calendar year) has risen to more than 2.7 Million tons while the import of Oilseeds is around 1.5 Million tons per annum. With a young and growing population, edible oil consumption is expected to rise on a yearly basis making it an even more attractive market for foreign suppliers and local entrepreneurs.
The trend has been changing in the past year; the Oilseed Industry has seen a new trend develop that is the import of Soybean Seeds on a Premium Price Basis. The industry must be given a lot of credit for taking this bold and aggressive step that has put Pakistan firmly in the eyes of Global Soybeans players. Weak Global prices and duty advantage over other Oilseeds have also pushed for a conversion towards the import of Soybeans. The innovative step of Premium pricing has given Pakistani buyers a greater flexibility in booking physical prices as and when required.
While there is a potential of increasing the growth rate of Edible Oil consumption in Pakistan, we have to consider the enormous challenge of infrastructure at Port Karachi and Port Qasim. It is important for us to continuously keep upgrading our infrastructure facilities keeping future consumption in mind. This challenge should be the priority of our leadership as infrastructure is the key to handling more volume and reducing the cost of doing business.
To further enhance our standings in the global market, it is imperative that our various Associations should also concentrate on the Research and Development (R&D) of local oil and oil seeds as Pakistan dependency on the imported Oils and Oilseeds are enormous. It is indeed an admitted fact that for our Government, priority is mostly on cotton, wheat, rice and sugarcane but unfortunately there is hardly any effort to increase the local Oilseed production. It is important that we make the Government realize that we are one of the highest tax paying Industries in the country and deserve equal focus and commitment.
It is important to introduce an innovative proposition for Public & Private Sector participation in the growth of local Oilseeds and to improve yield of the same. The Government must be pushed to provide accurate and authentic statistics of local oil seeds production so that the Industry as well as the Government may have some clear direction.
Today the industry as a whole pays over Rs 100 billion in taxes directly or indirectly. It is the duty of Government to recognize the contribution of the Pakistan Edible Oil Sector and allied industries and solve their problems on a fast track basis. The Import Duty, Sales Tax and other Government revenue are highest in Pakistan compared to our neighbouring countries. Government should consider reducing duties and tax on this essential food items and encourage the Vansapati Manufacturers to invest in oilseed production in Pakistan with an aim to achieving self-sufficiency in edible oil in the coming decades.
(The writer is Chairman of Westbury Group of Companies & Pak-Malaysia Business Council)
Comments
Comments are closed.