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The inverted duty structure across the value chain of the crop – oilseeds, crude oil and refined oil is inflating the import bill of the country as regards to import of oilseeds.
According to officials, since it is cheaper to import crude oil and refined oil rather than oilseeds, there is high tendency for making import of finished goods.
As per the recommendation, CACP has suggested import duty of 2.5%, 5% and 12.5% for import of oilseeds, crude oil and refined oil respectively.
This is as against the current duty structure of where by an import duty of 30% is charged on oilseeds and 2.5% and 10% import duty are levied respectively on crude oil and refined oil.
As per the recommendation, the import duty would escalate as one move from raw material to finished product and not the other way around except for exigencies.
Apart from inflating the import bill, it is undesirably and unproductively damaging the domestic industry of oil seeds.
On one hand, the department of agriculture is taxing the government in sustaining crop specific schemes for pushing up the productivity of pulses and oilseeds . On the other hand, the inverted duty structure is opening the flood gates for high import of same crops. This is a complete drain on the economy and the agricultural scenario of the country.
Besides, to promote resource use efficiency, generate surpluses and augment agricultural growth, CACP is in favor of tariff rather than quantity restrictions to be employed as a regulatory instrument.
According to the recommendation, it will have a stabilizing and nutralising impact both for consumers and producers. For this, both imports and exports should be opened with only moderate duty with a provision of special safeguard.
On the other hand, it has also recommended for strengthening the procurement machinery and rationalizing statutory levies on procurement of pulses, oilseeds and wheat. At present, Punjab, Haryana and Madhya Pradesh are the major contributors to wheat procurement. The CACP is of the view such a similar dispensation should be put for other states levying statutory taxes in excess of 5% but less than these three states.
According to CACP, high statutory levies in these states (especially Punjab and Haryana) add to the costs of procurement of FCI which adds to the food subsidy bill. The economic cost of FCI for acquiring, storing and distributing food grains is about 32-43% higher than the MSP. On the other hand, high taxes and levies also drive out the private players from the market, and distort the market.
As regards to procurement, while Haryana, Punjab and MP produce 43% of the total wheat production, they contribute 87% of the procurement.
Other major wheat producing states, especially UP, contribute only 6% in the procurement whereas its share in the total production is 32%. This indicates an urgent need to strengthen the procurement machinery in all major wheat producing states.
Pulses and oilseeds, while require much less water than cereals, given sub-normal performance of monsoon in 2014 (up to mid-July), vigorous emphasis needs to be laid on augmentation of production of these crops which will reduce the huge import of edible oils and pulses to the tune of Rs. 67 thousand crore .
However, it has been observed by CACP that farmers are not diversifying wholeheartedly towards oilseeds/pulses, one of the reasons being the procurement of oilseeds and pulses in the states is not being carried out efficiently.
Therefore, the procurement machinery including that of NAFED be strengthened so as to ensure smooth procurement of pulses and oilseeds when the market prices go below their respective MSPs.
