The ministry of agriculture has embarked upon a comprehensive exercise to rework the domestic pricing formula, the import duty and market intervention scheme for palm oil. Even if palm oil production is done on a low scale currently, it has wider implications for the government’s efforts to build domestic edible oil capacities.
This exercise will be completed before March 2011, officials said. This is significant since India is the fourth-largest edible oil economy of the world and half of the total edible oil requirement is met through imports.
“These are short-term measures to encourage palm oil production which incidentally forms part of the government strategy to increase edible oil production in the country. Under the chairmanship of the agriculture secretary, some short and long-term measures have been decided to step up palm cultivation and palm oil production in the country. These measures and their outcome will serve as a background for the proposed launch of Mission on Oilseeds in the twelfth five year plan period,” official sources added.
Explaining the move, ministry sources said it will be difficult to cater to the increasing oil consumption through imports alone if oil exporting countries decide to divert considerable production for biofuel production.
Besides, the rising import bill is a dent in inflation. The review of import duty for palm oil will form part of the overall suggestion of the food ministry to raise import duty on edible oil to encourage domestic production.
Currently with a zero import duty on crude palm oil, the domestic pricing of oil is directly exposed to price fluctuations in palm and soybean in the global markets.
In order to incentivise domestic palm cultivators, the Directorate of Oilseeds, Hyderabad has been asked to rework the pricing formula for the domestic cultivators based on fresh fruit bunches per hectare and the kernel value ministry proposes to arrive at a uniform price fixing formula while industry bodies have suggested revising FFB from existing 12 per cent of crude palm oil ( CPO) output plus one third of kernel value to 16 per cent of CPO plus half value of oil byproducts.
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While in the long term, a price stabilisation fund is proposed to be created, the present market intervention scheme (MIS), run collectively by state and central government, will also be revised.
MIS is an adhoc scheme that fixes price for horticultural and other agricultural commodities which are perishable in nature and are not covered under minimum support price. MIS is implemented to protect the grower from making distress sale in the event of peak arrival period. Sources said MIS will be made more lucrative to support palm cultivators, both for acreage and yield.