Mustard seed export plan draws flak

The Solvent Extractors' Association of India (SEA) has opposed the move by the National Agricultural Marketing Federation of India (Nafed) to issue a global tender for the export of mustard seeds procured from farmers during the current crop season for shipment from Kolkata and Kandla ports. The last date for the closing of the export tender is 31 May.

SEA has urged the Centre in a memorandum to withdraw the global tender and immediately auction the rape-mustard seed in domestic open markets to buy and crush the seed and make vegetable oil out of it.

"Nafed has been procuring rapeseed/mustard seed at a minimum support price of Rs 17,000 per tonne and has resulted in an accumulation of nearly 18-20 lakh tonne oilseed. But around 90 per cent of the oil extractors are closed owing to the unavailability of oilseeds," said D P Khandelia, president of SEA.

In such a crisis, Nafed should not sell oilseeds in the international market where the price is around Rs 11,500, at current exchange rate, he added.

"The industry is ready to purchase at a higher price of Rs 15,000-15,500 per tonne, but the tender does not allow domestic players to participate," Khandelia said.

He said Nafed had been purchasing oilseeds such as mustard or rapeseed for more than three months now and this had led to problems.

"Unless Nafed stops purchase from the farmers at the minimum support price, it cannot sell to domestic market as then there will remain an arbitrage opportunity," explained Khandelia.

SEA expects that following Tuesday's meeting with the government and Nafed officials, the tender may be withdrawn.

Khandelia said, "It seemed after yesterday's meet that the government realised that Nafed's decision might be an unviable one that would mean sale of seeds at throwaway price". The tender could be cancelled before May 31, the last date for submission.

Nafed should start selling the oil seeds at 4-5 lakh tonne every month over next four to five months, Khandelia said.

"The domestic industry has the capacity and requirement for large volumes of oil seeds and would be willing the buy whatever quantity Nafed can sell," he added.

In view of shortage of edible oils and the country's huge dependence on import of edible oils, the government has been encouraging farmers to grow oilseeds and shift from other crops to oilseeds by declaring higher minimum support price (MSP) for various oilseeds including rapeseed.

SEA is of the view that it would not be prudent on the part of India to export rape-mustard seeds when the country is facing a shortage of vegetable oil and is being forced to import 45 to 50 lakh tonne per annum.

In addition, the capacity utilisation of the domestic industry is only 35-40 per cent due to the non-availability of oilseeds for crushing and processing.

On the price front, both international and local prices are depressed. Currently, the domestic price of rapeseed oil is quoted at Rs 375 per 10 kg, which works out to a maximum buying price of rapeseed at Rs 1,500 per quintal from the farmers by the industry. Most of the oil mills and solvent extraction plants in northern India are not able to currently operate due to commercial disparity.

Since Nafed is purchasing rapeseed at Rs 17,000 per tonne with freight and other expenses of Rs 1,200, its f.o.b. cost (ex-Kandla Port) is Rs 18,200 per tonne or $415.

Currently, the international price of rapeseed '00' of European origin, an internationally accepted variety, c.i.f. Hamburg, is $260 (Rs 11,500) for the May-June shipment.

Moreover, the Indian mustard seed being pungent, has hardly any demand in the international market. Thus there is a difference of Rs 6,700 per tonne between international and domestic price.