The Hindu Business Line : Importing high oil content seeds will make commercial sense

Agri-Biz & Commodities - Oilseeds & Edible Oil
Industry & Economy - Exports & Imports

Importing high oil content seeds will make commercial sense

G. Chandrashekhar

Currently, soyabean imports are subject to compliance with phyto-sanitary conditions and customs duty. The US is seeking to modify this.

Mumbai , April 27

In yet another attempt to crack open the burgeoning Indian market for oilseeds and products, the Economic Research Service of the US Department of Agriculture (USDA) has, in its recent report titled "The Role of Policy and Industry Structure in India's Oilseed Markets", concluded that allowing liberal import of oilseeds instead of vegetable oils would be in the country 's best interest.

USDA's case for allowing oilseed import is premised on huge investments that have been made in building processing capacities in India. A large part of the processing capacity is idle because of highly erratic or stagnating domestic output of oilseeds.

LITTLE BENEFIT TO GROWERS

Arguing that the current high tariffs on oilseeds and oils imports afforded little benefit to oilseed growers while supporting processors and imposing high costs on consumers, the report suggests that liberalisation of tariff and non-tariff barriers, with high oil tariffs continuing, would lead to large-scale imports of oilseeds, primarily soyabeans, as import of raw material substitute for imports of the processed commodity.

Improved access to oilseeds would allow processors in India to boost capacity use, resulting in lower processing costs and increased net revenues and employment, the report has argued.

Finally, the report concludes, if India were to allow oilseed imports, the US which tends to be more competitive at exporting soyabeans than soya oil, might benefit.

NOTHING NEW

There is nothing new in the arguments in favour of oilseed imports. India has been grappling with oilseeds import proposals for nearly two decades now - since 1987, to be precise. Many of these so-called researched benefits could actually turn out to be illusory.

A number of oil mills and solvent extractions plants are no doubt idle. Many are actually old and their owners have either abandoned them or moved to some other business; but surely investments have been recovered long ago in most cases. Some of the idle mills have rising real estate value, much more than what oilseed imports can provide.

Currently, soyabean imports are allowed liberally (under open general license) subject to compliance with phyto-sanitary conditions (including import in split form) and customs duty of 30 per cent.

It is this aspect of the import policy that hurts American interests and is sought to be modified through `research' reports.

Major concern

One of the major issues of concern to the policymakers is the direct impact of imported oilseeds on domestic oilseed growers.

Vegetable oil is surely "one removed" from oilseeds, and its liberal import is unlikely to impact domestic oilseed prices as much as direct import of oilseeds themselves would.

The second issue relates plant quarantine or phyto-sanitary requirement.

Indian ports, especially the smaller ones, are ill-equipped to handle large volumes of oilseeds, both from the point of quarantine checks and bulk cargo handling include warehousing needs.

India would need to import, for instance, five tonnes of soyabean to obtain one tonne of soya oil.

This would lead to wasteful expenditure on handling and transport.

Also, the long time lag between import contracting, physical arrival and conversion to oil can potentially distort the domestic market.

For India, which is a vegetable oil deficit country, it would make commercial sense to import high oil content oilseeds such as rapeseed and sunflowerseed rather than soyabean.

FACING CHALLENGE

Without doubt, the country's oilseeds based sector faces serious challenges.

The problems of the sector are entrenched because of policymakers' apathy. Solutions to the issues are also known. What is required is political will to implement progressive ideas, without falling prey to external influence.

With rising incomes and population growth, and existing low per capita consumption of vegetable oils and vegetable proteins, demand in the country for oilseed and related products is definitely rising relentlessly.

India is sure to go the China way in terms of demand growth. We must design solutions appropriate to the current status of the economy.

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