Domestic Edible Oil Industry Driven by Imports

EghtesadOnline: Iran’s oilseed production currently stands at 430,000 tons per year while annual imports amount to 2.23 million tons, according to secretary of Iran Vegetable Oil Guild Association.

News ID: ۷۸۷۷۲۴

13 February 2022

“At present, the country has 25 oil extraction factories and 58 edible oil refineries with nominal capacities of 5.4 million tons and 5.8 million tons respectively,” Amir Houshang Birashk was also quoted as saying by IRNA.

The official noted that 71% of domestic demand for vegetable oils are imported in the form of unrefined oil, 20% in the form of oilseeds and the remaining 9% are produced locally.

“We import soybeans, sunflower seeds, palm and colza. Palm oil accounts for 30% of the country’s vegetable oil consumption. We first imported palm oil from Malaysia in the fiscal 2004-5 with the aim of reducing the amount of trans fat consumption that made up 27% of our vegetable oil products. At present, with the gradual increase in palm oil imports and other measures, the figure has dropped to less than 2%,” he added.

Birashk noted that around 70% of edible oil consumed by Iranians are liquid and 30% semi-solid, with 63% of the total production consumed by households and 37% by businesses and industries.

In a recent letter to the Agriculture Ministry, the Vegetable Oil Industries Association has warned against “a serious crisis” facing the market as a result of shortage of the essential commodity.

The warning comes as Pakistani media recently reported that thousands of tons of cooking oil/hydrogenated oil are being smuggled from Iran in different cans of 5 to 20 kilograms, causing heavy losses to Pakistan’s formal sector and national exchequer, which runs into billions of rupees.

Pakistani newspaper The News International quoted industry sources as saying that total consumption of cooking oil/hydrogenated oil stands at 350,000 tons all over Pakistan, including 125,000 tons cooking oil and 225,000 tons of hydrogenated oil on per month basis. They said 500 tons to 1,000 tons were being smuggled from Iran on a daily basis, causing billions of rupees of losses to the national exchequer.

The official sources said both the land and sea were being used to smuggle goods, especially cooking oil from Iran these days, and there was an incentive for smuggling because the cooking oil and hydrogenated oil prices had escalated in the domestic market in the wake of higher palm oil prices in the international market.

Palm oil prices almost doubled in the international market, jacking up from $700 per ton to $1,400 per ton and there was no possibility that its prices would come down in the international market because in Malaysia, employees working on palm oil fields were not available owing to Covid-19 restrictions.

The industry sources said the government did not bring down the General Sales Tax on import of palm oil from 17 to zero percent and abolishing the 2% customs duty despite making commitments publicly. Now it seemed that smuggling was allowed rampantly so that domestic prices could reduce.

Import of vegetable oils are heavily subsidized in Iran, as the product is considered “essential” in the country.

Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.