Sharp decline in edible oil prices

Better management needed to get rid of imports

Sep 06, 1999

The edible oil prices, palm and soyabean oil, dropped to a record low in the international market. But,, this decline did not bring any relief to the consumers in Pakistan as the pudding was not for them, they would continue to face the inflationary pressures like captive-balloons.

The benefit of declining prices in the international market, whether it is edible oil or petroleum oil, was never passed on to the consumers while they are forced to share the burden whenever prices are increased internationally.

The international prices of RBD palm oil and soyabean oil had dropped to $300 per tonne and $430 per tonne from an average $610 per tonne and $625 per tonne respectively in the month of April.

The downward trend in international prices of edible oil, however, provided an opportunity to the revenue collectors who doubled the duty on edible oil by adding Rs5000 to the existing duty which took it to Rs10,800 per tonne in Pakistan.

The consumers, however, have a point to be happy that the fall in the palm and soyabean oil prices internationally would help improve Pakistan's trade deficit by 30 per cent. In terms of value, the import bill is definite to save about $200 million on account of edible oil imports during the current fiscal.

During the last fiscal year, $590 million worth of palm was imported while soyabean valued at $223 million. After the fall in prices, it is expected that the oil import bill of these commodities would show a decline of nearly $200 million by the end of the current year.

According to market sources, prices declined due to over production. Another factor for price decline was the absence of India which is considered as a major player in Malaysian edible oil. Now, besides fresh L/Cs by Pakistani importers, India and China have also entered the market giving an stability to the prices from $300 to $410, said market sources. India which remained off the market for quite some times has made a quantum jump by placing orders worth 929,247 tonnes for consumption in the first half of the current year as compared to 520,516 tonnes it had lifted during the corresponding period last year. Market sources believe that India has made purchases of another 350,000 tonnes recently which placed India as the top buyer of Malaysian palm oil.

China, which is another leading buyer of palm oil, has yet to make entry into the market. According to reports, the Chinese government has initially sanctioned a quota for purchase of one million tonnes of palm oil while another quota of 0.5 million tonnes is under consideration of the Chinese authorities, market sources said.

Although some leading importers have taken advantage of the market recession opening fresh letters of credit yet the exorbitant increase in duty structure defused the enthusiasm among the trading circles.

The government has recently increased import duty on palm oil from Rs5,800 to Rs10,800 while on soyabean it is Rs9,800 plus the sales tax.


The edible oil prices touched the lowest ebb during the last one quarter due to over production coupled with currency crisis in the Far Eastern countries, which consequently eroded the value of various commodities produced in that country by 30-40 per cent.

The money-starved economy forced the Malaysia to increase palm oil production to improve its forex position. The market situation, however, has started taking a turn with the entry of India and China into market as the RBD palm oil prices have started showing recovery by gaining the level of $410 per tonne from $300 per tonne some 15 days back.


In 1997-98, Pakistan imported edible oil worth $760 which includes $660 million for import of palm oil and $100 million on soyabean oil.

Despite concerted efforts to produce edible oil through indigenous resources, the import continued to increase to over $800 million during 1998-99.

Analyzing the factors, off-setting the efforts for improvement of locally produced edible, market sources said that although the local production of edible from different sources is increasing yet the unplugged leakage are making it a futile exercise to improve the situation. Illegal trade of edible oil and ghee by the profiteers is the major cause for increasing reliance on imported oil. A bulk of imported as well as locally produced edible oil and vegetable ghee is smuggled out to neighbouring Afghanistan and Iran.

Pakistan is an agricultural country and the present government is giving more importance to the agriculture sector and progressively allocating bank resources for promotion of this sector. The actual benefit of the agricultural resources, this country enjoys, could, however, be transferred to the masses only through better management of these resources.