Edible oil industry officials anywhere in the world will always be awaiting cues about production, inventory and prices from Godrej International Director Dorab E Mistry, for he has the knack of coming up trumps on most occasions. Hardly anyone would mind Mistry being self-congratulatory about his production model for palm oil where Indonesia and Malaysia, in that order, have a domineering presence.
He has come good once again in the current season. This particular oil is of strategic significance for India, for it has a preponderant presence in our import basket. At the same time, the country, perennially highly import dependent, to close the gap between domestic demand and supply, is buying increasingly large quantities of degummed sunflower and soybean oils in the world market.
At the recent Globoil 2012 meet, Mistry said that in return for our free trade in veg oil, withdrawing import taxes, Indonesia and Malaysia have found it proper to ‘squeeze hapless Indian consumers’ by charging high duties. Mistry recommended ‘a small import tax on all vegetable oil imports’. Such a move, according to him, will be a ‘painless’ way of revenue generation for India struggling with a high budgetary deficit. Mistry cannot be unaware that food inflation refuses to go away. Edible oils are a sensitive commodity and an import duty at this stage is likely to result in a mark-up of prices. In the first 11 months of the current oil year up to September 2012, our imports of edible and non-edible vegetable oils were up 17.80 per cent to 9.157 million tonnes (mt) year-on-year. The burden of Indonesian and Malaysian export duty for India got moderated by a fall in palm oil prices. Now, gains in rupee will keep import costs under check.
Mistry argues that renewed Indian reforms push, leading to improvement in business sentiment, will result in strengthening of the rupee. As food inflation hopefully starts correcting in 2013, New Delhi, according to him, will be ‘tempted’ to introduce an import duty on crude palm oil and raise the levy on refined, bleached and deodorised (RBD) palmolein in case there is moderation of food inflation. We are not charging any duty on crude oil and only 7.5 per cent on refined oil since April 2008. The issue is now due for a revisit. As he recommends import levy, he has a bigger picture in mind than just restoration of balance in trade policies of exporting nations. Mistry is stating the obvious by saying that India needs to spare a serious thought about its own millions of oilseeds farmers. No doubt they being given ‘some form of protection’ and their toil made adequately rewarding, will see our oilseeds production and productivity making big strides.
This is absolutely essential. Oil expert Govindbhai Patel says Indian productivity of groundnut is 66 per cent of world average, soybeans 42 per cent, rapeseed 45 per cent, sunflower 55 per cent and sesame seed 88 per cent. As oilseeds productivity has remained low in spite of a number of government-sponsored campaigns, including technology missions and national oilseeds and development project and oil demand rising at an annual average rate of 5.6 per cent, our import dependence has risen from 44 per cent in 2001-02 to 60 per cent in 2011-12. During this period, imports are up from 4.4 mt to 9.8 mt. What is not to be lost sight of, is that the swelling ranks of the middle class and changing food habits will see a rise in per capita consumption of fat from the present 13.2 kg. This will give a further push to imports unless, of course, a meaningful productivity campaign is launched. Productivity is the linchpin through which India could achieve a greater degree of self-reliance in oilseeds, for land increment will be a difficult proposition. For example, land under the five oilseeds mentioned earlier, rose annually by only 1.9 per cent in a ten-year period to 24.8 million hectares (mh). A good portion of the land under oilseeds cultivation is marginal in nature without benefits of irrigation. In this context, Patel’s recommendation that our ‘farmers need more irrigation water’ than subsidised fertilisers or loans with interest subvention, assumes significance. Didn’t the late monsoon arrival and its capricious behaviour till August create a big scare about the fate of the current kharif oilseeds production? The government is now in reforms mode. Will not a breakthrough in productivity and domestic supply be hastened in case the government allows corporate farming in palm trees and other oilseeds? This, after all, is the experience of many countries.
Thanks to major precipitation of rains in the past two-and-a-half months, there finally was a marginal shortfall in area under kharif oilseeds till October 11. According to the agriculture ministry, kharif coverage this time is 17.753 mh against 18.032 mh in 2011. Thanks to late rains in north India, whatever be the shortfall in kharif oilseeds output, is likely to be made good by a good rabi harvest. But in no event should we lose focus on rapidly increasing irrigation coverage for oilseeds.