The Hindu Business Line : Unanimity over oilseeds import still eluding industry

THE Agriculture Minister, Mr Sharad Pawar's recent statement that the Government is open to liberalising import of oilseeds so as to help utilise the large idle crushing capacity within the country has created a lot of expectation among oilseed processors. They are hoping the forthcoming Budget would have something in their favour.

Some of the industry associations have been for years pushing for oilseed imports, but without success. All the time, the Government's reservation was based on apprehensions of entry of exotic pests and diseases into the country through largescale unmonitored commercial imports. The second reason is that Indian oilseed farmers would be affected if imports were permitted.

With economic and trade liberalisation (quantitative restrictions on imports were removed three years ago), the Government has opened up oilseed imports. Even today, imports are free (under open general licence) subject to specified customs duty and phyto-sanitary clearance.

However, oilseed imports have not materialised. The rate of customs duty at 35 per cent makes the imported goods expensive vis-à-vis indigenous material. Second, the plant quarantine conditions are perceived to be onerous. For instance, soyabean can be brought only in split form and not whole. This is to prevent unauthorised diversion of commercial imports for planting purposes.

Attempts are currently on not only to get the rate of customs duty reduced but also to dilute the strict phyto-sanitary norms. A section of the processing industry is hoping the duty will be scaled down to 15 per cent.

However, discussion with a cross-section of the processing industry representatives and concerned others shows there is no unanimity of opinion either within the industry itself or outside about the desirability of oilseed imports.

It is a debatable subject and in the past, farm lobbies had opposed it tooth and nail. Farm scientists have expressed apprehension over largescale import of oilseeds and are not in favour of dilution of plant quarantine conditions.

The case for import of oilseeds rests on the premise that it would help the processing industry find raw material and raise capacity utilisation; will lead to increased availability of oilcakes or extractions (animal feedstuffs); and will replace vegetable oil imports to an extent.

However, economics and existing infrastructure bottlenecks could render the proposal unviable, opine experts. According to Mr Pradip Desai of Palmtrade Services, a trade intermediary, disposal of oilmeal produced out of imported oilseeds could turn out to be a major constraint because of limited market within the country.

Re-export of meal would be hit by high costs involved in transportation from processing centres to ports and infrastructure limitations relating to physical shipment. For example, it would require import and handling of 5.5 tonnes of soyabean to obtain one tonne of soyabean oil. Processing of 5.5 tonnes would yield 4.4 tonnes of soyameal, which will have to be moved back to the port for export.

Given very competitive conditions in meal export market, it would be well-nigh impossible to export the resultant oilmeal without financial support.

It is possible modern crushing plants may be installed at port-towns; but it would be a wasteful investment given the existing large idle capacity across the country. It would be akin to large refineries coming in port-towns in recent years dependent almost entirely on vegetable oil imports, observed an industry representative.

Why does China import oilseeds in a big way? The world's largest vegetable oil importer has in recent years begun to encourage oilseed imports to cater to its rapidly growing demand for animal feed from the livestock sector.

As domestic meal production is far short of demand, China is forced to import; and instead of meal it has recently started to import oilseeds, mainly soyabean.

Indian scenario is different, experts believe. The demand for feed from livestock sector is growing, but not big enough to create a shortage. The country continues to export oilseed extractions, mainly soyameal and to a limited extent extractions of rapeseed and groundnut, with aggregate volumes going up to 30 lakh tonnes.

To make oilseed imports a successful proposition, certain pre-conditions have to be fulfilled, according to Mr Desai. Import duty on oilseeds must be linked to oil content of seeds with some allowance for processing costs; the domestic meal usage must show clear evidence of falling short of indigenous meal; infrastructure improvements are necessary for efficient end-to-end handling; and new crushing units must be established on economic merit and financial viability, rather than on Government sops.

Oilseeds imports will have to compete with vegetable oil imports on a level-playing field and not because some players are lobbying for it hard, seems to be the common refrain among experts.

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