The Hindu Business Line : Relief unlikely for vanaspati units from new order

Mumbai, Feb. 20 The Centre’s move to remove the mandatory use of indigenous oils such as mustard oil in the manufacture of vanaspati is unlikely to bring any substantial relief to the beleaguered industry

Vanaspati producers are now free to use any oil or a combination of oils – indigenous and/or imported – as raw material for the finished product. The decision seems to have been necessitated by present market conditions of strong vegetable oil prices and poor outlook for the upcoming rapeseed/mustard crop.

While there is freedom to use any oil or combination of oils, given the level of prices and vanaspati’s shrinking share of the country’s oils and fats market, the industry’s fortunes are unlikely to see any change.

Instead of examining and addressing the structural issues that stymie the vanaspati industry as also the entire vegetable oil complex - including oil mills, solvent extraction, refining - the policymakers are content with tinkering with policies that related to trade and prices. The entire vanaspati industry – or what is left of it just now – would now start to consume imported oils – mainly crude palm oil – for its raw material requirement.

Of the over 220 factories in the country, more than half are either sick or closed, while the others operate at substantially lower capacities. Low priced imports from Nepal and Sri Lanka at continue to adversely affect the industry’s economics.

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