In latest news, Punjab's agriculture department plans to spend Rs5 billion to promote the cultivation of oilseed crops, mostly revolving around sunflower, canola and sesame across the province. Whether or not Rs5 billion is enough to change the country's cultivation landscape is another affair, the initiative ought to be appreciated in principle, though of course the move would require a much more deliberated inclusive effort than a single provincial department spending on a one-off five billion rupee project.
Here are some quick hard facts as necessary context. Pakistan produces only 10 percent to 12 percent of edible oil requirements through local crops, varying from year to year, and depending upon whose estimates one trusts. And here is the background maths of it, according to industry estimates.
Total demand for fat in the country is about 4.3 to 4.7 million tons. This is mainly met by direct oil imports (palm oil) of 2.8 to 3.2 million tons. About 0.25 million tons of soybean oil is also imported. Of the rest, about three-fourths is produced locally but from imported seeds, which includes rapeseed, soybean and sunflower. Little wonder then that annual import bill of edible oil and oilseeds was around $3.6 billion or about 6.5 percent of total imports last year. Bear in mind that soybean seeds are also increasingly being imported to meet the growing demand for soybean-based feed – mainly for poultry, and marginally for livestock and fisheries.
Can Pakistan really do something about local oilseed production? Theoretically yes, likely not. Not unless a great change in policy mindset is brought about.
Oilseeds may be grown in high water availability season, but famers naturally prefer to use that season for mainstay crops. In the offseason, oil seeds crops compete with wheat crop, which not only enjoys support price but is also the song, dance and folklore of farmers. Secondly, marketing lines between farmers and seed processers have not been sufficiently established. Oilseeds also do not enjoy necessary extension services by agriculture departments whereas seed type and quality of oil seeds has not been a matter of focus by agriculture research institutes.
And while oilseed imports may be huge, the industry doesn't have as great lobbying power as do other segments of the political economy. Oil seed farmers aren't as big as wheat, rice and sugarcane who enjoy direct or indirect representation in the parliament. Whereas neither oil extractors nor vanaspati manufacturers are as moneyed as the usual big business houses who enjoy heavy clout in the likes of FPCCI or Pakistan Business Council.
Add to that another twist: there are two interest groups within oil seeds. Poultry industry would mainly want local cultivation of soybean seeds, provided it is cheaper to produce soybean locally. Feed is about 75-80 percent of the cost of poultry, of which about 75-80 percent is the cost of soybean meal. Over the last five years, soybean seed imports have hit about $900 million (as a result of poultry-led demand), which is quite a huge number for one single non-fuel tariff line. Overtime if soybean meal is adopted by local livestock industry, then demand for soybean will only grow north, which in turn would create pressure on the government to grow soybean locally.
Channels checks with solvent extractors suggests that they would also prefer soybean cultivation over other oil seeds, because in the case of soybean, both oil and meal are sold at better rates and better volumes. The vanaspati industry, however, is mainly interested in other oilseeds because unlike soybean, other oil seeds have a better oil yield.