Commodities

Non-tariff initiatives are needed to boost oilseeds output

G Chandrashekhar | Updated on June 09, 2020

An agency report quoting unnamed government officials suggesting that India may hike customs duty on imported vegetable oils to fund its domestic oilseeds promotion programme is currently doing the rounds.

If true, it is a bad idea. Over the years, tariff changes have made little difference to domestic oilseeds cultivation. Tariff hikes have hardly helped oilseed growers, but have surely enriched importers taking speculative position. Today, the fate of the Indian oilseed growers is as bad as it was, say 20 years ago.

Often, changes in tariff from time to time have been either ill-timed or kneejerk or thoughtless or worse, the government succumbing to lobby pressure. The annual hike in minimum support price for key oilseeds is often nullified by either excessive import of vegetable oil or ill-timed tariff changes that depress domestic oilseed prices.

Changes in import tariff are at best short-term fixes, and certainly not a long-term turnaround strategy for the oilseeds sector. However, successive governments, even while paying lip service to oilseeds growers, have continued to encourage large-scale import.

No wonder, area under oilseed cultivation is stagnating at around 260 lakh hectares. Three oilseeds – soybean, groundnut and rapeseed/mustard – account for about 220 lakh hectares or 85 per cent of total cultivated area in the two seasons, kharif and rabi. But the yields are abysmally low at about 1,100 kg per hectare, 50 per cent of world average. Lack of breakthrough in seed technology, monsoon dependence and poor motivation/incentive for growers have combined to keep oilseeds production trapped.

Way forward

If the government is serious about Atmanirbhar Bharat (Self-reliant India), raising import duty on imported edible oil is a poor solution. It is critical to first neutralize the adverse effects of large-scale or excessive import of low-priced vegetable oil on Indian oilseed growers.

Non-tariff options are the way forward. Even without disturbing the present duty structure, the government must impose a quantitative ceiling on vegetable oil import, say at about 130 lakh tonnes a year, which would translate to about 10 per cent lower than the current level of annual import. In addition, imports have to be strictly monitored and regulated in a way that the country is not flooded with imported oils at the time of either planting or harvest of domestic oilseed crops.

QR on vegetable oil import – to be reviewed every six months – will immediately help boost domestic oilseed prices above the specified minimum support price (MSP). If, over a few seasons, oilseed growers are able to obtain prices at or above MSP, they will feel reassured and will continue to improve their agronomic practices.

The government need not spend any extra money at all for oilseeds development. It is enough if the existing funds are deployed productively. As this writer has argued in the past in these columns, oilseeds cultivation must be promoted in frontline States of Punjab and Haryana in order to break the grain mono-cropping cycle (rice-wheat-rice cycle) that has destroyed soil health and pushed the water table to alarmingly low levels. This initiative needs no money; but only political will to implement.

We have been talking about exploiting non-conventional oil sources such as tree-borne oilseeds. Nothing much as happened in the last thirty years to leverage this nature’s bounty.

It is clear, given the entrenched interests and utter lack of political will to bring about a major transformation, India is not going to be able to become self-sufficient in vegetable oils for long years. But the journey towards self-reliance must start. The alarming dependence on imports to the extent of 70 percent of our consumption needs is the result of a series of omissions and commissions of successive governments. It must change; and change is possible without efforts to raise additional funds.

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

Published on June 09, 2020

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