As the Punjab government has been active against profiteering and hoarding, taking steps particularly against loot of ghee manufacturers and sealing their factories in Lahore and Guranwala, the oil manufacturers have decided to shut their mills from today (Saturday) against this move of the provincial government.

Instead of implementing govt decision of reducing ghee and oil rate by Rs15 per cent the millers have opted to stop production and go on strike against the interference of the government in business affairs of ghee manufacturers, as they cannot run industry on losses, they claim.

Industry sources said that Punjab ghee and edible oil manufacturers would close their mills from Saturday for indefinite time. They said that government cannot force the manufacturers to continue to run the mills and produce ghee as it is not flour or sugar industry which is dependent only on local raw material. The government, in the past tried to control the rates of sugar and wheat flour but failed as market mechanism operates itself without any interference of the government.

They said that ghee mills have also decided not to open Letter of Credit for import of palm oil, leading to closure of mills and causing shortage of ghee and oil in the province.

Meanwhile, some constraints in supply of ghee and cooking oil were reported in the markets after the announcement of price reduction by the provincial government. According to details, the Punjab government imposed a Rs15 per kilo/litre reduction in the rates of ghee and cooking oil to shift the benefit of a marked fall in international prices of palm oil from manufacturers to the public. The sudden shortage of ghee and cooking oil from the markets has raised severe problems for the public.

According to the shopkeepers, the supply has been halted due to the new reduced rates whereas crisis can be prevented if the suppliers provide them ghee and cooking oil on new rates as prescribed by the government.

It is to be noted that production of vegetable ghee and edible oil recorded a modest increase in the last few years as demand remained strong and edible oil refining received new investment.

According to statistics, cooking oil output rose from 311,000 tons in fiscal year 2011 to 450,000 tons in last fiscal year. Vegetable ghee production went up from 1 million tons to  1.5 million tons during last four year. Manufacturers of oil and ghee say production would rise further during the current fiscal year as exports to Afghanistan under the manufacturing bond facility has been started while local demand is becoming stronger on faster economic growth. During the first five months of FY15, ghee production has already risen by 7 percent to 485,000 tons and that of cooking oil by 9 percent to 165,000 tons.

Growth in cooking oil and vegetable ghee output has led to higher imports of palm oil and soybean oil as well, which are used as raw materials. Industry officials say vegetable ghee and cooking oil mills have the capacity to produce more than two million tons of products each year, but due to tariff and other constraints they are currently utilising around 60-70 percent of their capacity. They say the mushrooming of ghee and cooking oil units in the informal sector is also a big challenge. Issues like tariff and gas and electricity supplies make full capacity utilisation difficult. Small cooking oil manufacturers point out that a nexus between top industry players and oilseed suppliers is preventing uniform growth in the industry.

They said that the new move of the govt to keep the ghee manufacturers in control will cause lower production, leading to shortage of edible oil in the market.

According to them, rounds of talks between the PVMA, Minister Food and Secretary Industry Punjab remained inconclusive and both parties could not reach any agreement.