Supply cooking oil through PDS to needy consumers

While the nationwide lockdown to prevent the spread of coronavirus (Covid-19) is inevitable, it has unavoidable adverse consequences. One of them is the sharp rise in prices of essential commodities, including that of edible oil, that can hurt the poor.

Stocks of imported oils in the country have currently fallen to less than 15 lakh tonnes as against around 22 lakh tonnes a few months ago. A significant part of the quantity is in the form of crude vegetable oil and is with the refiners.

Precarious situation

With marketing of the rabi oilseeds harvest in limbo and port operations grinding to a near-halt, there is a real danger that in the coming weeks, supplies of cooking oils will tighten, leading to a price spiral. The situation can worsen if the lockdown is extended for safety reasons.

The emerging situation of tightening supplies creates a big opportunity for influential refiners to brazenly skim the market by raising prices. Ramadan demand is around the corner. Already, refiners are making huge profits, especially in the branded oil segment, given the large differential between wholesale and retail prices.

With lower interest rates and expanded liquidity, there is going to be enough money in the banking system to go around. This could also contribute to inflationary tendencies. Additionally, a weaker rupee is also putting upward pressure on imported commodities.

Easing import curbs

New Delhi must recognise the looming risk of a spike in edible oil prices unless supplies are augmented without delay. It is time to check speculation and excessive stock building in the market. A simple yet effective way would be to lift all restrictions on refined oil import. Even a reduction in customs duty can be considered as the rupee has depreciated by as much as 10 per cent, which in itself acts as tax indirectly.

Also, on the lines of the government decision to supply one kilogram pulse per family per month, cooking oil can also be supplied to needy households through the public distribution system. This would be a welcome relief for millions of deserving households that are already reeling under the onslaught of Covid-19.

State agencies such as STC can be tapped to undertake refined cooking oil import, if need be, even at zero duty. This is a sovereign function the government must discharge at the current testing times.

The writer is a policy commentator and commodities market specialist. Views are personal

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