Survey advises incentives to raise oilseeds output

The Economic Survey released on Wednesday stated an incentive regime for producers of oilseeds and edible oils be put in place based on a structured price policy and tariff framework.

This was because any major breakthrough in oilseeds production in the short-run was unlikely.

"With the price support policy favouring foodgrains, there is very little incentive for the farmers to move away from the production of foodgrains to oilseeds. The support price policy for foodgrains has been a major deterrent to crop diversification," stated the report.

With changing dietary patterns, crop diversification would speed up India's agricultural development.

The report suggested the recent MSP policy had disturbed inter-crop price parities leading to a shift in area towards cereals, largely from crops like oilseeds.

As a result, there was excess stocks of cereals while large quantities of edible oil was imported.

According to the survey, a freeze in the minimum support price (MSP) of rice and wheat would help maintain inter-crop price parity more than any increase in MSPs of oilseeds.

"Increasing the MSP of oilseeds, besides imposing a fiscal burden will also exert an upward pressure on the market price of the essential commodity," said the survey.

The tariff structure should be used only as an instrument of crop diversification. As import duty on edible oils was high, further duty hikes would lead to hardening of domestic prices.

Edible oil prices rose by 6.6 per cent in 2003-2004, after a steep rise in 2002-2003 of 27 per cent as international prices rose and the 2002 crop fell.