India’s vegetable oil imports — in volume and value terms — have skyrocketed in recent years to about 14 million tonnes, worth approximately $11 billion (over ₹70,000 crore). In value terms vegoil imports are next only to crude and gold, and the highest for any food commodity.

Our import dependence has worsened to over 70 per cent. In a situation of shortage, it is logical to expect that domestic producers will reap large gains. But, far from it, in our country, oilseed growers are in distress. They are unable to receive even the minimum support price assured by the government.

No wonder, planted acreage has stagnated at 26-28 million hectares. Yields continue to be abysmally low (1000-1100 kgs per hectare) as growers have no incentive to improve agronomic practices. The marketability of the crop is weak as the price support mechanism is nearly non-existent.

Not by tariffs alone

Portends are ominous. The recent protests by groups of farmers in different parts of the country are a clear sign of the growing disenchantment in rural areas. The unseemly confusion around the calculation of minimum support price had added to the foul mood among growers.

As the situation is fraught with possibilities and can turn potentially explosive, it is time for policymakers to seriously get down to addressing the real issues of the sector rather than merely tinker with tariff policies in a way that helps traders and speculators.

We have to acknowledge that the oilseeds and vegoil sector is crying for serious policy attention. The policy objectives should be to balance the interests of growers and consumers alike. The policy must ensure more remunerative prices to oilseed growers so that they strive to produce more by raising yields. At the same time, the policy must ensure that poor consumers have access to cooking oil at affordable prices.

Clearly, liberal policies or free market operations of the last 25 years (unfettered imports, zero or low rate of duty) has failed to protect domestic growers insofar as the oilseeds and vegoil sector is concerned. It is time we looked at the familiar vegoil sector from unfamiliar angles.

(1) Ceiling on vegoil imports : There must be a ceiling on the volume of edible oil import. There is reason to believe, private trade imports excessive quantities for speculative purposes and floods the domestic market which in turn depresses domestic oilseed prices.

A reasonable guess would be that 10-15 per cent of the current import volume is speculation driven; and often it represents not genuine sale but stock transfer from the origin (Indonesia, Malaysia) to the destination market (India).

Huge inventories (as much as two million tonnes) are often piled up in India which in turn depresses the domestic market. A ceiling on vegoil import (with provision to review it every six months, depending on the exigencies of the situation) will reduce the quantum of arrivals and support domestic producers.

(2) Monitor imports : Imports have to be closely monitored in terms of registration of contracts, tracking arrivals and so on. Trade will become more transparent. This will help policymakers with real-time information for taking informed decisions proactively. Currently, policymaking for the sector is reactive. This must change.

(3) Reduce long credit period : Many Indian importers are mired in what can be described as ‘import debt trap’. They often enjoy a credit period of 90-150 days for payment of the value of the cargo to overseas suppliers. The long credit period encourages over-trading and fosters an unending loop of imports. Reducing the credit period can make a difference.

(4) Dynamic tariffs : In addition to dynamic changes in tariff values as practised at present, import duties should be varied dynamically and fixed in a way so that imported oils are not cheaper than the MSP for domestic oils.

(5) Growers will benefit : The aforesaid steps will lift domestic oilseed prices from the current low levels and provide a morale booster to growers. Marketability of the crop will improve automatically as ceiling on oil import will help boost capacity utilisation in domestic oil mills and solvent extraction plants.

(6) Consumer protection : It is important to ensure that consumers across the country – especially the poorer sections of the population — have access to cooking oil at affordable price. This is indeed possible by including edible oil under Public Distribution System and National Food Security Act. Even two kilograms of refined oil per family per month at subsidised rates would go a long way in advancing food and nutrition security. If it entails a subsidy, so be it. A combination of PDS and private trade supplies will help advance consumer interest. Such as policy would deliver socio-political dividends.

Pulses formula

Clearly, desperate situations call for desperate remedies. The government has demonstrated courage in taking steps with far reaching implications in the pulses sector. It has been accused of protectionist tendencies.

There is immense international pressure to ease policy restrictions on pulses; yet, the priority at the moment is remunerative prices for pulse growers.

We must realise that around the world, the policy context is becoming increasingly complex. Governments are struggling to bring about a judicious reconciliation or balance between domestic socio-economic and political compulsions on the one hand, and international obligations on the other.

So, it is time Indian government’s policy attention is diverted towards oilseeds. Like their pulses counterparts, Indian oilseeds growers are capable of rising to the occasion to boost production and reduce the dependence on imports; but a conducive policy environment is necessary.

Importantly, policies backed by investments to address the structural issues of oilseeds production so as to raise productivity levels are imperative. It is the sovereign duty of the government to protect the livelihood of growers and advance the interests of consumers.

The writer is a global agribusiness and commodities market specialist. The views are personal

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