Concerned over the unabated rise in edible oil prices adding to inflationary pressure, the government has convened a virtual meeting to be chaired by the Food Secretary to discuss price related issues pertaining to edible oil and oilseed with stockists, oil mills, importers, oil industry and major oilseeds producing states. The meeting will take place Monday, May 24.

Apart from Secretary, Agriculture and Secretary, Department of Consumer Affairs, the heads of DGFT and NAFED as well as Food/Agriculture Secretary of Maharashtra, Madhya Pradesh, Gujarat, Karnataka, Uttar Pradesh, Tamil Nadu and Rajasthan have been invited.

A few edible oil associations including SEA, IVPA and COOIT have been asked to invite major players including importers, processors and traders.

The government’s concern is understandable in the face of relentless rise in domestic prices which is a mirror reflection of international prices that have nearly doubled in the last six months primarily because of La Nina weather effect and ultra-accommodative monetary policy. Domestic oilseed prices too have followed suit. Trade suspects oilseed output, especially soybean harvest, is grossly overestimated.

The country’s alarming import dependence (at 70 per cent) tells its own sad story – that in recent years there has been no significant breakthrough in domestic production.

So, what are the options before the government to mitigate the unaffordable cooking oil prices? It would surely be tempting to slash the rate of customs duty on palm and soya oils. But it is unlikely to exert any decisive impact. Overseas suppliers are sure to jack up the rates, negating the price effect if any.

Tinkering with customs duty on vegetable oil import has become a failed fiscal instrument as evidenced by the experience of last twenty years. Yet, in the short-term it may be seen as the only viable option, if only to send out a public message that the government was taking action.

The government seems to be harbouring suspicion of large-scale inventory building by market participant. Port-based and pipeline stocks are estimated at 18 lakh tons. The government may issue a strong directive to the trade to immediately de-hoard the stocks, although such a move would make a mockery of the recent dilution of Essential Commodities Act.

The wide difference between wholesale and retail price of various oils is another area that needs attention. Traditionally, during summer months of May, June and July, edible oil consumption takes a dip, and picks up from August when the festival season begins.

The other side of the coin is that the current high prices of domestic oilseeds are sure to encourage growers to expand the planted area and improve their agronomic practices in the upcoming Kharif season. Shortage of soybean seed should be addressed without delay.

Finally, New Delhi lacks commercial intelligence and forward guidance as far as sensitive food commodities are concerned. Regulating and monitoring edible oil import trade would allow access to relevant data and facilitate informed decision making.

(The author is a policy commentator and agribusiness specialist. Views are personal)