The Hindu Business Line : Soya oil prices soar on speculation

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Soya oil prices soar on speculation

G. Chandrashekhar

Govt notification for import of GM organisms has market in a spin

Mumbai , April 11

The Government notification for import of genetically modified organisms (GMOs) for purpose, among others, of food, feed and processing in bulk has put the vegetable oil market in a tailspin with speculators dealing in soyabean oil having a field day.

The notification has raised more questions than it has sought to answer.

Players in the market are completely in the dark about the procedure to obtain approval, the time likely to be taken for grant of such approval and related issues.

Handling of consignments

There are also questions about the capability and wherewithal of Indian ports and customs houses to handle such consignments. Apparently, there is lack of trained personnel and sophisticated equipments to test for GM traits.

For instance, it is possible to test a consignment of corn (maize) or soyabean or cottonseed to ascertain whether or not it is genetically modified because of the presence of protein.

However, when soyabean is crushed into oil, almost all the protein goes into the meal and only a trace is left in the oil, something which is rather difficult to detect. When the oil is refined, even that trace of protein is lost, making any investigation for GM trait almost impossible.

Tracking imports

After obtaining stipulated approval, once the imported cargo is cleared and blends with indigenous oil, it loses its identity. Tracking the flow of imported oil is another vexatious issue. Domestic production of soyabean oil (non-GM) is about 10 lakh tonnes and imports are about 20 lakh tonnes, making the task tough and unproductive.

There is possibly non-application of mind as also lack of preparedness for implementation in the case of the latest notification on import of GMOs.

Prices rise

Soya oil prices on the futures exchange in Indore have soared to a new high of over Rs 400 per 10 kg trading lot, a huge jump of over 10 per cent in recent days. Prices in other exchanges too have risen quite sharply. Unbridled speculation on the bourses is threatening to hurt consumer interest, according to some observers.

Clearly, the recent soya oil price movement has much less to do with demand-supply fundamentals. Both globally and domestically there is a surfeit of oilseeds and oils as a result of which prices have been soft.

Currently, the country is harvesting a large rabi oilseeds crop of rapeseed/mustard, groundnut and sunflowerseed. The recent spurt is obviously the handiwork of a handful of speculators out to milk the market at every available opportunity. What is tragic in the present case is that while consumers end up paying a high price for soyabean oil, growers are not benefiting from the price rise.

FARMERS AREN'T BENEFITTING

Soyabean harvest season was over several months ago (it is a kharif crop harvested in October) and farmers have already disposed of the stocks. They are not the ones to benefit from the present price rise.

The draft rules of the Health Ministry relating to labelling of GM foods and more recently the procedure specified in the Export-Import policy announced last week have contributed to the present price spurt. What object is sought to be achieved with the new regulation is unclear.

According to the policy, import of any food product that contains GM material and is being used either for industrial production, environment release or field application will be allowed only with the approval of the Genetic Engineering Approval Committee (GEAC).

All import consignments containing products that have been subjected to genetic modification shall carry a declaration stating that the product is genetically modified.

What prompted the government to come with the new guidelines at this point of time is a matter of conjecture. There are many who believe, it is one way to restrict import of soyabean oil. Should the belief be correct, the purpose is unlikely to be achieved.

BAR ON FREE TRADE

At a time when foreign trade ought to be de-bureaucratised, the latest Commerce Ministry move is seen as official interference in free trade. Our regulatory systems and capability to oversee regulated operations are inadequate. Failure of the government to check illegal planting of GM cottonseed is one glaring example.

It is unclear, if the notification would be applicable to imported cotton.

Until a couple of years ago, India used import about 20 lakh bales of cotton, much of it from USA and obviously genetically-modified. Following production increase internally, imports are now down to about 5 lakh bales.

Without loss of time and to prevent speculators from rigging the market further, the government must immediately come up with clear procedural steps for expeditious grant of approval for imported consignments. Whether the GEAC is geared to meeting the business needs of the vegetable oil importers and industry is anybody's guess.

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