Will quantitative curbs on edible oil imports help?

The Saurashtra Oil Mills Association (SOMA), representing the interests of domestic crushers, should be complimented for bringing to attention the utterly facile trade policy of edible oil imports that hurt the domestic oilseed growers and crushers alike.

The association has highlighted that import volumes are in excess of our domestic needs which, in turn, grievously hurt farmers by unduly depressing domestic oilseed prices.

This has been going on for long years. ( Business Line September 19, December 12 and January 31). Changes in import duty from time to time have hardly helped the cause of domestic stakeholders.

If anything, rampant speculation characterises our edible oil import trade. Huge inventories are built within the country in advance and lobbying for a hike in customs duty starts.

A hike in duty benefit brings windfall profits to a handful of importers, but does hardly anything positive for growers and crushers here.

Duty differential

This must stop. While conceding that our country is far from self-sufficient in edible oil production and that imports are absolutely necessary, it would be sensible to follow a foreign trade and tariff policy that takes into account domestic sensitivities and serves larger economic and social objectives. The extent policy does not.

New Delhi needs to realise and admit that the extent policy of varying tariffs and customs duties from time to time (often falling prey to trade lobbying) has failed to deliver positive results for the domestic stakeholders.

The consequences are there for all to see — depressed oilseed prices, growers’ distress and nationwide protests.

The demand for imposing quantitative restriction on edible oil import is fully justified.

The government should fix an annual ceiling of, say 11 or 12 million tonnes, import. Also, it must ensure import contracts are registered with a designated authority and arrivals are closely monitored.

Customs duty can be varied from time to time depending on exigencies of the situation. This will send out a positive signal to the market in general and to growers in particular.

Another issue that deserves attention is the long credit period enjoyed by Indian importers.

Credit period

Credit period of 90 to 150 days encourages over-trading, leading to compulsion to import more in order to pay for previous imports. Many of the importers in the country are in what can be described as ‘import debt-trap’. The credit period should be restricted to 30 days maximum, especially for origins in the Asian region.

Imposing quantitative restriction is by no means unusual. Clearly, extraordinary situations demand extraordinary remedies. Domestic socio-economic and political compulsions often override international obligations, if any.

We are now living in a world of protectionism. Practising liberalisation for the sake of liberalisation and at the sacrificial altar of farmers is seen as nothing short of stupidity. At the cost of domestic growers, our government is enriching growers overseas.

Surely, there were times when liberalised imports (even zero-duty import) worked; but that policy was the need of that particular period and it served a purpose. We now have to tailor our trade and tariff policy to suit the current circumstance and the current imperative to support domestic oilseed growers without compromising consumer interests.

Whether the government will take a hard but highly beneficial decision to restrict imports quantitatively remains to be seen. The growing unrest among the farming community following the failure to support prices may find expression in the political sphere in the months ahead.

The writer is a policy commentator and agri-business specialist. Views are personal

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