MORE RISE IN OIL, GHEE PRICES EXPECTED
Sep 6 - 12, 2010
US dollar is also gaining strength versus Pak rupee and is currently trading at around 87 per rupee. Already overburdened by soaring prices of essential commodities, ghee and oil prices witnessed sudden surge due to devaluation of rupee.
The ghee and cooking oil are the basic food items of human diet. With the passage of time the overall production as well as consumption of ghee and cooking oil has significantly increased in Pakistan. Increase in rates of palm olien has also impacted the domestic market rates. The rates of canola oil at Multan also rose to Rs4500 per maund.
Vegetable ghee/cooking oil industry is mainly dependent on imported edible oils particularly the Refined Bleached Deodorized Palm Olein which is mainly used in the manufacturing of vegetable ghee/cooking oil. The prices of vegetable ghee/cooking oil are linked with international market prices of edible oils.
The market sources attribute hike in oil and ghee prices to surge in edible oil prices in the international market. They expect more increase in oil and ghee prices.
According to them, the Malaysian palm oil exports for 1-15 July 2010, up 16.4 per cent to 708,384 tonnes from the quantity of 608.324 Metric tonne for the same period June 10. It included 93.121 tonnes of RBD palm oil, 318,064 tonnes of RBD Palm Olein, 63,287 tonnes Palm Stearin, and Crude Palm Oil 105,555 tonnes.
According to market sources, there are about 150 units of edible oil and oil extraction in Pakistan, involved in extraction and production of various types of cooking oil and ghee. However, the number of ghee manufacturer's registered with PVMA at present are 95. The share of ghee and cooking oil in large scale manufacturing is 7.4 per cent. During the last seven years the average annual growth for ghee/edible oil production is around seven per cent.
In a bid to decrease the cost of vegetable ghee and oil, the government in the budget 2010-11 had reduced customs duty on crude palm oil by Rs1000 per metric ton from Rs9000/MT to Rs8000/MT. This step was taken to ensure stability of prices of basic utility. However, significant surge in oil and ghee prices is a matter to ponder by the policy makers. The price of different brands of good quality ghee rose to Rs735 from 680 per kg, whereas 5kg tin of average quality ghee is available at Rs650 against Rs600. On average basis, the price of one kg packet has increased by at least Rs30-50 per kg.
A spokesman of the Pakistan Vanaspati Manufacturers Association (PVMA) said the association has been growing remarkably and now it comprises of 94 members engaged in the manufacture of vegetable ghee/ cooking oil in the organised sector contributing around Rs30 billion annually to the government exchequer in the form of custom duty, federal excise duty and income tax etc.
According to him, the PVMA member units are not only catering to the needs of Pakistan's whole population, but also supplying this dietary item of daily use to the people of neighboring countries. The export of the vegetable ghee to Afghanistan and the Central Asian States via land route through Torkum and Chamman borders is a good source to earn precious foreign exchange for the country in addition of boosting trade relations with these countries.
Previously this association was functioning as a trade entity under the Companies Ordinance, 1984 and now it has been duly granted license to operate as trade association with effect from 08-09-2008 by the Directorate General of Trade Organisations, Ministry of Commerce, Government of Pakistan.
He said the PVMA's member units annual production capacity is around three million tons with the facility to produce both high quality vanaspati ghee and cooking oils. In Pakistan, following oils are used for manufacturing hydrogenated fat (vanaspati ghee) and cooking oils:
1. Palm Oil
2. Soybean Oil
3. Cottonseed Oil
4. Sunflower Oil
5. Rape Seed/ Mustard Oil (Canola)
6. Corn Oil
According to market sources, the price of cooking oil and ghee is expected to increase, triggered by a supply shortage subsequent to the suspension of import contracts by Malaysia at the old agreed rates and the supply shortage due to the enhanced demand for cooking oil/ghee by international donor agencies for flood victims.
The sources said that rationale for suspension was due to the international rate rise of palm oil from $850 to $950 per ton. "Due to increase in prices, different companies in Malaysia cancelled deals at old agreed rates. Resultantly, the importers were compelled to make fresh deals at prevailing rates," sources said.
According to them, some ghee/oil mills are directly affected by the recent floods and have stopped production. At the same time orders from different donor agencies for supply of stocks for the victims of floods have risen dramatically. These mills are currently working at full capacity and may be unable to sustain domestic supplies. Independent circles are of the view that the government needs to look into plight of poor consumers and ensure stability in ghee and cooking oil prices.