Commodities

Refined oil import will help meet festival demand and curb speculation

| Updated on July 02, 2021

Our dependence on imports has worsened over the last two decades to an alarming 70%

The government should be complimented for its practical decision to lift the restrictions on import of refined palm oils in addition to reduction in customs duty. It is a step in the right direction given the current inflationary conditions.

The move is intended to help expeditiously augment the availability of cooking oil ready for marketing and human consumption. It will also help curb speculative tendencies in the market caused by unnecessary restrictions on import of refined oils. Importantly, festival demand – August to October - will soon kick in and the policymakers have wisely kept the import door for refined oils open till the end of the year to prevent any eventuality.

Expectedly, the import lobby represented by a handful of large refiners has begun to cringe. There is no reason why it should. We are facing an extraordinary situation which demands an extraordinary remedy. It is not the case that crude oil import is restricted; if anything, duty on crude palm oil has been reduced. The business of refiners will continue.

At this juncture, for the government, liberal import of refined cooking oil makes eminent economic, social and political sense. The consumers will not be at the mercy of a handful of large importers-refiners. By allowing refined oils, traders too will now have a role to play in augmenting availability without any delay.

Soon after the meeting convened by the Food Secretary to review edible oil prices on May 24, this author advocated freeing the import of refined oils to quickly augment availability, contain rising prices and support hapless consumers (see BL Commentary May 25).

Indian domestic prices of cooking oil are impacted by global factors. This year, weather aberration (La Nina phenomenon) has reduced the harvest size of major oilseeds such as soybean and hurt palm oil production prospects. This has the potential to become a recurring phenomenon.

Our dependence on imports has worsened over the last two decades to an alarming 70 per cent. While our domestic production of vegetable oils is about 7.5 to 8.0 million tons, imports constitute 13-14 ml t valued at a whopping $10 Billion (₹75,000 crore).

This scary situation reflects the policy failure of successive governments that were content to permit liberal import of semi-finished goods – crude vegetable oil – while the Indian raw material producer – oilseed grower – languished without a remunerative price. This has to change.

The Indian oilseeds and vegetable oil sector needs creative disruption. While import of edible oil will be inevitable in the short-to-medium term, it is necessary to reduce the adverse impact of unregulated import on the domestic oilseed growers and processors.

This calls for some ‘out of the box’ ideas, some of which were presented during the National Oilseeds Conference organised by the government in Hyderabad in February 2020; but the action taken is not known.

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

Published on July 02, 2021

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