Edible oil prices high despite 27pc fall in palm rates

Saturday, October 04, 2008
By Mansoor Ahmad

LAHORE: Palm oil prices have declined from $1,100 per tonne six months ago to $573, resulting in a fall of over Rs27 per kg after adjusting the dollar rate differential, though without a visible decline in retail rates.

The rates of palm oil, which is the main raw material of the edible oil industry of Pakistan, have registered a decline of around 27 per cent after the easing of crude oil prices in the global market. However, the rates of edible oil in the country are still in the range of Rs120 to Rs145 per kg, which was fixed by the manufacturers when global prices were at their peak.

The News has found that at peak with rates revolving around $1,100 per tonne, the import price of palm oil was Rs68,200 at the dollar rate of Rs62 six months ago.

After adding the fixed import duty of Rs9,800 on palm oil, the cost increased to Rs78,000 per tonne. Adding 15 per cent sales tax worth Rs11,700 and one per cent excise duty and withholding tax, each amounting to Rs2,000, the total landed cost of palm oil was Rs91,700 per tonne.

Manufacturers had increased the edible oil and Vanaspati ghee rates immediately after the increase in palm oil rates in the international market. The rates reached their peak starting from $460 per tonne in June 2006 to $1,100 in the early months of 2008.

Palm oil rates started declining sharply in the past two months without any relief to the consumers. At the current rate of $573 per tonne, the import price of palm oil used by the local industry comes to Rs44,694 at a high dollar rate of Rs78. After paying a fixed duty of Rs9,800 per tonne, the cost increases to Rs54,494. Sales tax has been increased by one per cent to 16 per cent which amounts to Rs8,719, taking the cost to Rs63,203. After adding excise duty and income tax at one per cent each, the total landed cost comes to Rs64,703, which is Rs27,000 per tonne less than the earlier cost.

The manufacturers, however, are not passing on the benefit to the consumers, though the decline in rates has also been gradual. In fact, palm oil deliveries for December and January shipments are even lower.

Economic experts point out that regulatory authorities, should take notice of the undue profiteering by the edible oil industry. They said that proper checks by various institutions could easily force the manufacturers to adhere to fair practices.

They noted that the income tax department for instance should inflate its income to the tune they overcharged. Manufacturers usually declare the same percentage of margin of profits that they have been declaring over the past years. They said they reduce margins in case of higher global oil rates but most of them do not review their profit margins when global edible oil rates go down and their profits soar.

Experts said that most of the manufacturers would try to fool the government and consumers by lamenting that the decline in global palm oil rates has been neutralised by the increase in the value of dollar vis-‡-vis the Pak rupee. They further noted that the calculations based on their own methods provided to the media would prove them wrong. They said the government should establish its writ to ensure the relief that the consumers deserve in the current inflationary environment.

From sea to shore: A businessman’s struggle in Pakistan

Saturday, October 04, 2008
by Saad Hasan

KARACHI: After assuming charge of a navy merchant ship at a very young age, Haleem Siddiqui thought it was time for him to move on and sail into the world of commerce instead. Little did this seafarer know then that for doing so, he will have to brave through a tumultuous sea of Pakistani politics in the bargain.

Even now, as Chairman of the Pakistan International Container Terminal (PICT), the only such facility in the private sector which is owned by a Pakistani, he claims that all odds are against him.

However, there is good news in the near future. On October 5, 2008, when a ship carrying two sophisticated sea-to-shore quayside cranes for his terminal anchors at Karachi port, he will have a different reason to prove that Pakistanis can compete with any foreign terminal operator.

“You must come and see them. It will be something so different,” an enthusiastic Siddiqui, 67, said about the cranes, which help load and unload cargo from a ship. PICT already has four quayside cranes, two mobile harbor and 10 rubber tired gantry cranes.

For PICT the importance of new addition to terminal facilities is much more than just competing with other private operators. It is over and above the contractual obligations which Siddiqui had committed when he was finally allowed to set up the terminal after a battle of more than 20 years.

His lifelong struggle has its roots in advice given by his father almost 50 years ago. “I remember it very well. He told me whatever work you do, do it whole heartedly otherwise you will go nowhere. Age was an important factor and I had to firm up my mind then.”

Born to a doctor in 1941 in Lucknow, Siddiqui was fascinated by traveling to different places. After college, he migrated to Pakistan in 1958 when only 17. By the next year he was on the seas, living his dream onboard the ship “Pakistan Promoter”. “Back then there were no marine academies,” he recalled. “We used to go straight to the ship for training.”

For 12 more years, he remained affiliated with merchant navy, completed his masters and worked with different Pakistani and international shipping companies. By the time he decided to move on, in 1971, he was already commander of a ship. “There were not many qualified people in the marine services industry,” he said recalling how new shipping lines were fast coming up against lackluster growth in service providers on port.

A strong foresight backed by experience of service in merchant navy had made Siddiqui conscious of the changing trends in the shipping industry. He decided to venture into the stevedoring business despite having no experience in this particular field.

“Life is a gamble. One has to take risks,” he said about the decision to quit the job and invest whatever he had saved in the business. “I had my wife and a son and no liability as such. I must say my wife was supportive. I told her if something happened, I’ll just pick up my bag and go to sea again.”

Just like that, he bought a partnership into a struggling stevedoring company, Premier Mercantile Services and jumped into the world of cargo handling. “Stevedoring is loading and unloading cargos from a ship. It looks very simple but seriously it is not,” he said in a recent interview with The News. “While loading and unloading cargo, you are playing with the stability of a ship, you are also responsible to safely store cargo according to its nature and considering the voyage it is bound to make.”

Aware of the shift in mode of transportation, which started in 70s, from conventional shipping to containerization, Siddiqui knew it was imperative to equip his company with modern equipment.

“We kept on investing in the business and hardly took anything home. This is something which ship owners started to see as we improved and avoided even invisible damages to containers,” he said, adding big names like Cowasjees and Dinshaws slowly disappeared from the ports and shipping scene as they did not keep pace with changing trends.

In the ensuing years Premier Mercantile Services Limited had established its name as a leading company in the stevedoring business. In December 1981, he wrote to authorities that he wanted to establish a container terminal at Port Qasim, which was being constructed 50km from Karachi center.

“I still remember we wrote to Port Qasim suggesting that we were interested in developing a container terminal,” he said, lamenting “They laughed at me. They said it was not possible for container ships to come there.”

An opportunity to prove him right was to present itself soon. In early 80s dock labor at Karachi Port Trust (KPT) went on strike and Siddiqui pushed forward the idea of handling the ships at Port Qasim.

“Overnight we shifted all the equipment to Port Qasim and handled seven ships there. I was the first one to that,” he said, adding that made Port Qasim Authority (PQA) realise the importance of its location and finally in 1983 invitations were sought for construction of a container terminal there.

His company also participated but the contract was awarded to Dubai’s Al-Ghurair despite the fact that Premier Mercantile was handling bulk of the cargo at Pakistani port. Al-Ghurair which had no experience of handling container cargo did not invest anything till 1996.

Similarly in 1990 when KPT invited firms to develop the infrastructure, his company also participated. “Again we were rated the best technically and financially as we had the backing of IFC (International Financial Corporation).”

This project which would have made Karachi port the first in the world to move from public to private sector was made hostage by labor unions that were backed by the port’s administration, he claimed.

During that period, Siddiqui went to court and finally on September 15, 1993, Supreme Court ruled in his favor. “Admiral Tasneem, Chairman KPT, ringed me up the same day and said lets sign the agreement without any delay.”

However, just when he was near achieving his ambition, a decision to venture into politics turned everything against him. That same year he ran for a seat in parliament and was elected member of national assembly on a Pakistan Muslim League (PML) ticket, which as a party did not do well at the polls.

“Nawaz Sharif dragged me into politics,” he said recalling the time he got acquainted with the politician who was loved by industrialists for his business friendly policies. “The government formed by Pakistan Peoples Party created every hurdle in my way and the project was cancelled in 1995,” he said.

While he took the battle to the court again, foreign companies were preferred for setting up container terminals at KPT and Port Qasim. His fortune did not change even when PML was voted into government in 1997. When the PML government decided to set up a new terminal, Siddiqui’s company was disqualified on the pretext that he was in politics. And again he went to court. It was not until 2002, when then President Pervez Musharraf was in power that KPT had to negotiate with his company following orders of high court.

Finally the PICT was commissioned in 2004. The growth it has shown in last four years has been phenomenal. From around 90,000 twenty foot equivalent container units (TEUs) it handled in its first year, growth has jumped 420 per cent to more than 472,000 TEUs in fiscal year 2008.

Now as Haleem Siddiqui is increasing the number of quayside, rubber tired gantry and mobile harbor cranes in anticipation of increase in cargo handling, there is another challenge facing him.

“Ports are the barometer of an economy,” he said, adding that “We are the first industry to get hit when trade slows down and that has started happening.” These are mixed blessing for the maverick shipping man turned politician. Despite the obvious downturn, he says he is hopeful. From a man who has done so much, these are encouraging words indeed.


Source : The News