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Price band on edible oils can balance interests

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May be achieved by tweaking import duty

The Economic Survey has a made a case for creating a price band for edible oils through levy of appropriate import duty.

Such a move will help balance the interests of domestic farmers, processors and consumers.

India, despite being a large producer of oilseeds, depends heavily on imports to meet half its edible oil requirements.

Output of oilseeds has not kept pace with the rising demand for edible oils. Import dependence has increased from 3 per cent to 50 per cent in the past two decades.

Total edible oil imports stood at 9.8 million tonnes in 2011-12, with an import bill of $9.5 billion, and are expected to cross 11.5 million tonnes this year.

Calibration

The Survey said calibration of the import duty structure would help promote domestic production of oilseeds. The high level of imports are primarily because of competitive prices of edible oils in the international market, aided by the prevailing low import duty structure to protect consumers.

“India has a market share that allows it to set some independent tariff policy. Considering the situation, it is time to frame a price band for edible oils in a manner that harmonises the interests of domestic farmers, processors, and consumers through imposition of import duty at an appropriate rate,” the Survey said.

Revenues

Besides, the import duty will also generate revenues, which can be utilised for an oilseeds development programme.

The edible oil industry has been demanding a hike in import duty on refined oils as a low duty structure has threatened the viability of domestic refineries.

Refined oils attract a duty of 7.5 per cent, while a 2.5 per cent levy has been imposed on the crude palm oil imports recently.

The Government recently hiked the tariff value on all edible oils, which had remained unchanged since 2006.

“This is a right step for aligning the tariffs to current prices of edible oils in the international market,” the Survey said. Such a move would also help the domestic production of oil palm.

Vishwanath.kulkarni@thehindu.co.in

(This article was published on February 27, 2013)
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