The Hindu Business Line : `Cut customs duty on oilseeds; raise it for refined oil imports'

WITH oilseeds crop production poised for a rebound this year, there is a welcome change in mood of the indigenous processing industry. India's premier association of vegetable oil industry and trade, the Solvent Extractors' Association of India is upbeat about prospects of an expanding role for the processing industry and greater contribution to import substitution. Through deft networking within the country and globally, SEA has emerged as the principal body to air the industry's views.

Mr Bipin V. Patel, President of the association, says the last two years were both challenging and rewarding. Business Line caught up with Mr Patel for his views on the emerging situation and the priorities for one of country's largest food processing industries.

Excerpts:

What is the current situation of vegetable oil industry in India?

A severe drought last year cut our oilseeds output which reduced availability of raw material for our domestic processing industry. Other countries too faced crop shortfalls due to adverse weather. The global market for oilseeds, oilmeals and vegetable oils was buoyant as a result. There is a silver lining to every dark cloud. Higher market prices and higher minimum support price have encouraged a shift of acreage to oilseeds. Our production is likely to rebound to 210-220 lakh tonnes. Prices of oilseeds, oils and meals will drop and stabilise back to 2001-02 levels, improving the raw material availability for the processing industry. While this is a positive development, reduction in customs duty on refined palm oils on April 30 this year has had adverse impact on the refining industry as it receives around 50 per cent of its raw material through imports.

What is your suggestion for increasing oilseeds production in the country?

We have to raise oilseed yields from the low level of 800 kg per hectare. Cultivation must be encouraged in irrigated areas with technical inputs to improve productivity and production. Best available hybrid seeds as well as the genetically-modified seeds should be used after due verification and appropriate studies to ensure safety, taking into account various concerns. SEA has been pleading with the Government to create an Oilseeds Development Fund to increase indigenous oilseeds production on lines of Sugar Development Fund. Or else, activities of Technology Mission on Oilseeds & Pulses should be strengthened with higher allocation of funds. Thankfully, hike in MSP for many oilseeds has prompted diversification from wheat-rice to oilseeds. The Government should persuade farmers to adopt crop diversification. This process needs policy support and incentive. Experience in Punjab, Haryana and a few other States where some corporates/companies have been able to enter corporate farming with the active encouragement and support of the State governments can be replicated in other States too, in consultation with farmers and the industry.

Do you think reduction in duty would hurt the domestic vegetable oil processing industry and farmers?

Yes. Now, with near normal rainfall across the globe this season, weaker oil prices will pressure domestic seed prices, hurt farmers interest and processing industry's raw material needs in the ensuing season.

It is imperative edible oil prices are maintained at a reasonable level by increasing the import duty on refined oils so as to keep a 15-percentage point duty difference between crude and refined imported oils. Such a differential would ensure both raw material for the refining industry by way of crude edible oils and remunerative prices of oilseeds for the growers.

SEA is vigorously pursuing the case of import of oilseeds. What are your views about import possibility?

Currently, oilseeds import is allowed without any restriction. However, 30 per cent customs duty plus 4 per cent SAD hurts commercial viability. India needs at least 100-110 lakh tonnes of edible oils per annum, of which domestic production is 55-60 lakh tonnes, with the balance imported. Despite oilseeds crop of 21-22 million tonnes in 2003-04, we would have to import 40- 45 lakh tonnes of edible oils to meet our growing requirement. Import of oilseeds would have no additional impact on farmers, as it would only replace a part of imported oils (finished product) with oilseeds (raw material). It would, on the other hand, help us utilise idle processing capacity, encourage value addition, generate employment in rural and raise revenue for the exchequer. It is a win-win situation for the farmer, consumer, industry and the Government. We are not talking of additional import but only substituting oils with oilseeds; say to the extent of 33 per cent. Duty on import should be reduced. To safeguard farmers' interests, the Government may fix an import tariff value for assessment, which may be higher than MSP, and encourage selected oilseeds during the lean season from April to October. What do you foresee about the future of oil palm as `plantation crop' in India?

Palm is perhaps the richest source of vegetable oil in the world. Palm plantations give the highest yield of 3.5-4 tonnes of vegetable oil per hectare, unlike cultivated oilseeds that yield only 350-400 kg of oil per hectare. The eight-lakh hectares identified as suitable for oil palm cultivation, hardly 40,000 hectares are covered at present. The area under palm cultivation is not expanding due to various reasons including pricing of fresh fruit bunches; but one of the critical reasons is that oil palm is not declared as "plantation crop" by State governments. If this is done, it would attract entrepreneurs and also foreign investors to take up oil palm cultivation in a big way which will help us bridge the supply gap in edible oil to a great extent in the years to come.

What are the tasks before the association?

There are various issues still unfinished including restoration of reasonable customs duty difference between crude & refined oils, reduction of import duty on oilseeds, removal of discrimination between indigenous and imported solvent extracted oil, amendment to Prevention of Food Adulteration Act to popularise blended oil and rationalise quality standards

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`Cut customs duty on oilseeds; raise it for refined oil imports'