The Hindu Business Line : Extracting more

AMONG THE FASTEST growing industries in the country's food processing sector, the vegetable oil sector — with an annual turnover of Rs 70,000 crore and expanding at a healthy 5 per cent per annum — operates sub-optimally because of serious structural deficiencies that deserve to be addressed. Low productivity of oilseeds, their suspect quality, poor scale-economies in processing and the skew in the pattern of edible oil consumption (to which calorie deficiency can be partly attributed) are issues that have for long escaped the attention of policymakers. With production growth trailing demand growth year after year, the supply gap is widening with the result that today the country's dependence on edible oil imports is as high as 50 per cent and the value of such imports is a whopping Rs 10,000 crore. The deficit is expected to worsen in the coming years, especially if the country's GDP growth rate manages to register 6 per cent and over, because demand for cooking oil is highly income-elastic.

With the Union Budget round the corner, a plethora of industry and trade associations in this sector have made a series of recommendations purportedly for strengthening the processing industry. These include fiscal relief in the form of abolition of excise duty on manufacture of refined oils and vanaspati, tariff rationalisation on imports of various vegetable oils, creation of an oilseeds development fund and so on. Unfortunately, most of the recommendations are merely trade-friendly and do not address the real issues. Admittedly, the importance of oilseeds is next only to that of foodgrains. The Budget must, therefore, bestow serious attention to ways and means of strengthening this sector through non-trade initiatives that will have a lasting effect on production, processing and consumption. It is absolutely essential to reverse the decline in the budgetary allocation for the Oilseeds Production Programme and indeed raise it substantially. A closer monitoring of application of funds is necessary. The Technology Mission on Oilseeds under the Ministry of Agriculture is mandated to implementing schemes for raising production and productivity of oilseeds. But this body seems to have lost steam and needs to be thoroughly revamped.

Needed is a healthy interface between the policymakers and the industry in the formulation and implementation of promotional schemes. Crop diversification efforts have made little progress because of distortions in the minimum support price regime for wheat and rice, on the one hand, and oilseeds, on the other. Contract farming in oilseeds can lead to disintermediation, shorter supply chain, better access to markets and assured supplies — a win-win situation for processors and growers both. The processing industry should be encouraged to explore backward integration. Liberal import policy for edible oil while being necessary to protect consumer interest has created tremendous complacency among the processing industry, which seems to assume that it is the government's duty to provide raw material. The Finance Minister must seek to engage the processing industry in a manner that would encourage public-private partnership in addressing structural issues.

More Stories on : Editorial | Foods & Food Processing | Oilseeds & Edible Oil

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Extracting more

For a new telecom mantra

Budget is FM's leather bag

Success of unorganised services

A cost that merits correction

Job status can make a good feed

Big Four have room for improvement

Basel II isn't the name of a movie

Reduce poverty

Better banking