Oil’s not well

In a landmark move, the Centre has decided to liberalise oilseeds exports by allowing bulk export of soyabean oil, groundnut oil, sesame oil and maize oil. So far, except for rice bran oil and coconut oil whose exports were allowed in bulk, edible oil exports were permitted only in 5-kg packs with a minimum export price of $900 a tonne. For a nation that is chronically edible-oil deficient (we import 70 per cent of our needs, running up an import bill of about ₹70,000 crore annually), this may seem as a bold measure. But it is part of a policy strain that holds that liberalisation will spur farmers to produce more.

The current move comes amidst expectations of a high oilseeds output of 33.6 million tonnes in 2016-17 (similar to 2010-11 and 2013-14 levels), against 25.3 million tonnes the previous year. This is expected to translate into an edible oil production of 7.28 million tonnes in the oil year 2016-17 (November-October), against 5.8 million tonnes last year. Of this output of over 7 million tonnes, mustard/rapeseed oil is expected to account for about 2 million tonnes, soyabean 1.5 million tonnes, groundnut 0.7 million tonnes, and cottonseed oil and refined palmolein 1 million tonnes each (most of the latter is imported). Edible oil imports are set to rise this year as well (to above 15 million tonnes), despite the higher output, because of the huge demand-supply gap. A policy of allowing liberal exports may spur production, especially when global prices are firm, but this should not lead to the sort of boom and bust cycles seen in the case of cotton. Whether it is oil or oilmeal exports, there is stiff competition to contend with to enter populous and meat-producing markets such as China, Vietnam, Saudi Arabia and Latin America.

Groundnut oil extractors in Gujarat expect export liberalisation to send out a positive signal to growers. This could improve millers’ capacity utilisation, at present hit by poor availability of groundnut due to peanuts exports. India’s non-GMO soyabean could command a premium in Europe, the US, Canada and South Korea. Therefore, India stands a good chance in the export market even if its domestic prices are ruling above global levels. However, to reduce import dependency India needs to raise its oilseeds output to well above 50 million tonnes in a few years. It is necessary to maintain a high differential between the import duty on crude and finished products. The shift away from palmolein needs to be sustained for health reasons. Palm oil imports have risen by about 11 per cent over the last five years (to about 9 million tonnes), whereas soyabean imports have quadrupled over the period to 4 million tonnes today. But the focus on indigenous alternatives holds the key. Oilseeds are rainfed crops which can bear climate stress. With sustainable technologies (as in the case of mustard), their acreage can be easily increased.

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