Frying times

The Centre’s quick-fix measures to rein in the runaway increase in edible oil prices seem to be landing it in a policy tangle, even as it is not providing intended succour to consumers. Spooked by the oils and fats component of the CPI rising 33 per cent year-on-year in July, August and September 2021, the Centre has slashed import tariffs on cooking oils three times in as many months. This has levelled effective tariffs on crude edible oils from 30.25 per cent to 5.5-8.25 per cent and refined oils from 41.25 per cent to 19.25 per cent. These duty cuts, taken with the decision to move refined palm oil from the restricted to free list, seem to have triggered record imports of the cheap oil, which accounted for 63 per cent of India’s vegoil imports of 124 lakh tonnes in the last 11 months.

This deluge of imports only partly helps consumers. India being the world’s largest edible oil buyer, tariff cuts by it usually trigger a spike in international prices nullifying their effect. Indian households also tend to prefer indigenously extracted groundnut, sunflower, mustard, rapeseed and sesame oil as their key cooking medium while using palm oil as a low-cost supplement. The recent flood of palm oil imports may therefore end up benefiting the processed food and restaurant industries more than ordinary households. While the jury’s still out on whether they can help consumers, recent policy changes do put oilseed farmers and the domestic solvent extraction industry in a quandary. With an extended monsoon delaying kharif harvests of soyabean and groundnut, farmers are now apprehensive if the demand and realisations for their crop will be depressed at the time of their arrival in the market. This may lead to farmers taking recent increases in the MSPs for rabi oilseeds such as rapeseed and mustard with a pinch of salt.

While one does not envy the Centre for its tightrope walk on balancing the interests of consumers with farmers, some changes in its policy approach may help with more proactive decision-making. Trade and tariff measures often turn out to be ill-timed because the government lacks reliable data on evolving production and demand trends, and imported inventory. To bridge this, the Centre can beef up its market intelligence on sowing, harvests and arrivals and put in place a registration system for tracking of import consignments. India’s central procurement mechanism, buffer stock policies and public distribution system are all overly focussed on foodgrains currently. With rising income levels, they clearly need to focus more on proteins, fats and processed foods that are taking up a higher share of the household budget. Balancing the interests of farmers with consumers also calls for a more flexible PDS system that stands ready to meet immediate needs of low-income households based on the evolving market situation. Importing limited quantities of packaged cooking oils for PDS distribution during the hiatus in kharif arrivals may be one way to quell the pre-festival spiral in cooking oils.

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