Restrict import of all veg oils; why only refined palm oil?

G Chandrashekhar | Updated on January 16, 2020

Now that refined palm oil and palmolein have been shifted to the ‘restricted’ list, a trade body has asked the government to restrict such imports within a ceiling, according to a wire agency report. The association should be complimented for seeking the restriction. But sadly, it has stopped short.

Why should palm oil be singled out? Why should the import of refined palm oils alone be restricted? Why not extend it to all vegetable oils? After all, it is the unrestrained import of vegetable oils that’s hurting domestic oilseed production and in turn the domestic milling industry.

Domestic growers hit

Indian oilseed growers have been the worst sufferers of the successive government’s facile option of resorting to the import of finished product (vegetable oil) instead of focusing on augmenting domestic output.

Unrestrained import of vegetable oils and huge speculative activity in the market continues to depress domestic oilseeds prices. More often than not, farm-gate rates have remained below the minimum support price guaranteed by the government. There is hardly any effective procurement mechanism for oilseeds. No wonder, growers are not interested in expanding acreage or improving the agronomic practices. Yields continue to remain rather low.

The Prime Minister wants farm incomes doubled. How will they, if they are not allowed a fair play in the market? The domestic oilseeds market for long years has been choked by the unrestrained import of edible oil. This must stop.

If the government is serious about delivering remunerative prices to Indian oilseed growers and move towards ensuring the doubling of incomes for oilseed growers, restriction on import of all types of oils is warranted. If anything, edible oil refiners have been a privileged lot all these years because of the government’s ‘liberal’ import policy.

Refiners have it good

And the refining industry does nothing except put the imported crude oil through a process that makes it edible at a cost of less than $50 a tonne. There is little value-addition in this activity.

If anything, the country’s oil milling industry deserves a liberal import policy that allows them to access oilseeds (a raw material) in order to enhance their capacity utilisation. Such a policy will augment oil and protein availability as well as create employment.

As argued in these columns in the past, vegetable oil imports deserve to be monitored and regulated. Registration of import contracts with a designated public authority will provide policymakers sufficient data (the type of oil, price, the period of import etc) to make proactive interventions in the market. It will also help prevent speculative tendencies in this market. In the absence of data, we see today only knee-jerk reactions from New Delhi.

Without doubt, edible oil imports will have to continue as self-reliance is still years away. Till the time imports continue, they should be regulated in a way that they do not hurt domestic growers’ interests.

Need for regulation

The Indian oilseed and vegetable oil market (a $20-billion business) needs creative disruption. The primary objectives of a new progressive policy ought to be: remunerative rates for oilseeds growers, expansion of area under oilseeds, a sharp increase in yields, capacity utilisation of milling industry and supply of cooking oil through the public distribution system to support consumers at the bottom of the pyramid.

Each one of the above objectives is achievable provided there is political will to take tough reformative decisions and implement them. This government carries loads of expectation from people, especially the farming community. It now needs to demonstrate that it will live up.

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

Published on January 16, 2020

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