Outbound smuggling via eastern and western borders is to blame for the increase in prices of cooking oil, says Qasemali Hassani, secretary of the Union of Food Wholesalers.
“Sadly, the government is in charge of the production of cooking oil from beginning to end, from the allocation of foreign currency to the supply of raw materials, pricing and distribution; the private sector plays no role in this matter,” Hassani was quoted as saying by IRIB News.
“Prices are set by the government and cooking oil is only being distributed at chain stores with those price tags, whereas only 25% of people have access to chain stores,” he added.
He called on officials to dismiss mandatory pricing and instead pay cooking oil subsidy directly to the people, which is 10 million rials ($40) annually.
Given the rise in global prices of unprocessed edible oils and other costs, consumer prices of products packaged in PET containers will increase by 10% and those packaged in other types of containers by 13% as per the recent decision of Market Regulation Headquarters.
Referring to the monthly consumption of 100,000 tons of unprocessed oils in Iran, Abbas Qobadi, a senior official with the Ministry of Industries, Mining and Trade, said, “To calm the turbulent market of edible oil, we’ve decided to increase both imports and production of solid fats and step up the distribution of this essential product.”
Abolhassan Khalili, the head of Vegetable Oil Industries Association, says reliance on import of raw materials, high costs of machinery and their maintenance, and corrupt practices arising from the government’s allocation of cheap foreign currency are three main challenges of vegetable oil production industry.
“Imports meet 90% of demand for unprocessed oil and oilseeds. That makes it all the more important to pursue development plans regarding expansion of oilseed crop cultivation areas more vigorously under current conditions,” he said.
“Manufacturers of production line machinery are based in Europe. Under sanctions, it has become increasingly difficult and costly for producers to purchase and import spare parts.”
Referring to the allocation of subsidized foreign currency at the rate of 42,000 rials per US dollar to import raw vegetable oils by the government, Khalili said, “The policy gives rise to higher risk of corruption related to import and production; the government needs to work out an alternative to support low-income households.”
Self-Reliance Goal
An estimated 550,000 hectares of farmlands are to go under oilseed cultivation in the current crop year (Sept. 2020-21) to produce 900,000 tons of the crucial crop, up 50%, according to the director of the Agriculture Ministry’s “National Oilseed Project”.
“Based on the ministry’s plan and provided farmers are encouraged to come along, it is estimated that 600,000 tons of colza will be harvested from 350,000 hectares, 200,000 tons of soybeans from 100,000 hectares and 100,000 tons of other types of oilseeds [sunflower, safflower and sesame seeds] from 100,000 hectares across the country,” Alireza Mohajer has also been quoted as saying by IRNA.
He said 10 oil extraction factories have signed agreements with the Agriculture Ministry in the current fiscal year (ending March 20), based on which they can buy directly from farmers as per “contract-based cultivation”.
Factories sign such deals with farmers for colza, soybean and sunflower seeds to be cultivated over 200,000 hectares. The companies will provide seeds, fertilizers and pesticides to the farmers, buy insurance for them and train them in modern farming.
“The government has announced a guaranteed purchase price for oilseeds. Farmers can sell their products in the market to the highest bidder but if, for any reason, prices plunge, the Government Trading Corporation will purchase the harvest at guaranteed prices,” Mohajer said.
The provinces of Golestan in the north, Ardabil in the northwest and Khuzestan in the south are the main colza producing regions of Iran.
The government is targeting 70% self-reliance in the production of oilseeds over the next 10 years to keep imports of oilseeds and vegetable oil in check.
“The plan kicked off in late 2015. Oilseed production was 46,000 tons in the fiscal 2014-15,” Mohajer told Young Journalists Club.
He added that US economic sanctions have compelled the Agriculture Ministry to accelerate the task of reaching the 70% target.
Per capita vegetable oil consumption in Iran is 18-19 kilograms a year while the global average is 12 kilograms. Iran’s annual demand for unrefined vegetable oil is around 1.6 million tons.
A total of 810,000 tons of vegetable oil were produced by domestic refiners in the first half of the current fiscal year (March 20-Sept. 21), down 15% compared with the similar period of last year, according to the secretary of Iran’s Vegetable Oil Industries Guild Union.
“Over the same period and due to economic sanctions that have created obstacles to money transfer plus the forex allocation problems, oilseed imports plunged by more than half year-on-year,” Amir-Houshang Birashk was also quoted as saying by IRIB News.
"The bulk of imports are palm oil from Malaysia and Indonesia, soybean oil from Argentina and sunflower oil from Ukraine and Russia,” he said last year.