Ghee and Cooking Oil Crisis Looms as Manufacturers Cut Production

Around half of the manufacturing units of ghee and cooking oil have halted or retarded their production in Pakistan due to the non-availability of raw materials.

This alarming situation has been shared by the industry with Secretary Ministry of Industries and Production Imdad Ullah Bosal on Monday.

The ghee and the cooking oil industry was responding to the notice of the ministry on the provision of information regarding the costing of vegetable ghee and cooking oil in compliance with price control and prevention of profiteering order 2021.

The Pakistan Vanaspati Manufacturers Association (PVMA) in a communique drew the ministry’s attention to the series of meetings held on the forum of ‘Prime Minister Task Force on Edible Oil’ and an exclusive meeting with the Minister for Industries and Production.

Although the core agenda of successive meetings were depleting domestic stocks vis-a-vis imposing ban on the export of palm oil unilaterally announced by Indonesia, on the sidelines of meetings, the factors such as low domestic stocks of edible oil, depreciation in the value of the Pakistani Rupee, increase in the price of other inputs such as electricity, diesel, packing material, upcoming finance bill 2022-23 and many other compulsions adversely affecting the price movement of end products (ghee/cooking oil) were also discussed.

PVMA assured that crisis of shortage of ghee would be managed through available raw material stocks and others (finished products) in transit through the supply chain. It was also conveyed that building up the depleting national stocks to 250,000 tons to attain normalcy and replenishment of transit stocks would take at least 2-3 months or to say by end of September at the earliest.

At present, the arrival of cargoes is of those contracts which were executed in March/ April at a price range of $1,750 – 1,850 per ton. At the time of the opening of L/Cs the US Dollar was at a parity of Pakistan Rupee 182, today Pakistani Rupee is as low as Rs 210 against the US Dollar.

Under the above-stated unprecedented and highly unpredictable state of affairs, many importers and manufacturers were reluctant from executing further orders. However, under national interest obligation and setting aside the noticeable uncertainties and huge financial risk factors, industry players have now started placing orders.

Foreseeing the very fragile situation of the country’s foreign exchange reserves, the commercial banks are also cautious in entertaining our L/Cs, since it is a high-volume business with huge capital investment.

PVMA said that almost half of the manufacturing units have halted or retarded their production and thus may not be able to comply with the latest costing requirement. Therefore, it requested that the notice be withheld till such a time when domestic stocks are normalized, the budget is formalized and market forces are stabilized.