The Hindu Business Line : Revamping the vegoil complex

THE DRIFT OF the Rs 75,000-crore oilseed and vegetable oil complex, an important segment of the burgeoning food processing sector, has been a cause for concern. Even as demographic pressure and income growth drive up consumption, the production has consistently trailed demand, necessitating large imports of vegetable oil at a cost of Rs 10,000 crore each year, possibly next only to petroleum products in the liquid bulk category. Unstable oilseeds production, quality problems, large idle capacities in primary and secondary processing, wasteful creation of fresh capacities, especially in refining, rising dependence on imports, skewed consumption pattern, falling export of oilmeals, complicated structure of indirect taxes, creeping dominance of a handful of multinationals, and inadequate policy support have combined to slow the once vibrant and growth-oriented industry.

The drift of the sector and the distortions in the industry and trade have made major stakeholders — especially farmers and the processing industry — wary of the future. It is heartening, therefore, that the Central Organisation for Oil Industry and Trade, the apex body, is preparing a Vision Document aimed at reaching 100 lakh tonnes production each of groundnut, rapeseed/mustard and soyabean — three principal oilseed crops — within two years, up from the current average of 60 lakh tonnes each. The aim is laudable but, given the short timeframe, appears ambitious. Coincidentally, the Indian Council of Agricultural Research too has announced plans to double oilseeds production in the next few years from the present 250 lakh tonnes by adopting specific technologies for different crops besides other initiatives. Without doubt, raising oilseeds productivity from the abysmally low 900 kg per hectare (half the world average and one-third the global best) and thereby expanding the production base deserve the focussed attention of the Centre, State governments, oilseed-growers organisations and the processing industry. All these years, the annual production targets of the Planning Commission and the Oilseeds Technology Mission have remained on paper. Instead of fixing fancy targets, it would be practical to work towards an objective — a freeze on vegetable oil imports at the current level of 45-50 lakh tonnes a year.

To achieve this, the country must produce an additional 5-6 lakh tonnes of vegetable oil every year (to meet the annual incremental demand) or an extra oilseeds output of 20 lakh tonnes. For this, an assessment of financial, technological and human resource needs is necessary. Identifying sources of funding and monitoring implementation are important. Once an achievable production enhancement plan is put together, it should be followed up by addressing such structural issues as consolidation of fragmented processing capacities, modernisation of the industry, rationalisation of the tax structure, reducing the skew in consumption pattern and quality assurance. The real challenge for the Centre is to cut the red tape in restructuring the oilseeds complex as no less than five ministries — Finance, Agriculture, Food and Consumer Affairs, Commerce, and Health — influence the fortunes of this sector one way or the other.

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