Import sops on palm oil may hit farmers

The government's decision to indefinitely extend the existing import duty concession on palm oil could act as a dampener for oilseed growers ahead of the rabi harvest season, industry players and traders said.

"The government should have instead reverted back the customs duty on palm oil to their original levels, which would have boosted edible oil prices and subsequently ensured better returns to farmers," a senior industry official said.

He was reacting to the order extending the 10-percentage point duty concession on palm oil for an indefinite period.

The government had earlier reduced the customs duty on imported crude palm oil to 70 per cent from 80 per cent and on refined palm oil to 80 per cent from 90 per cent to check spiralling inflation.

On October 31, the government said the concessions are valid only till December 31, after which it is open to review.However, the Centre indefinitely extended the duty concession, as inflation has not eased.

Traders and industry players said though after today's announcement the uncertainty over duties is temporarily cleared, the move might facilitate cheaper imports, leading to drop in local oilseed prices.

"Already the Centre has been purchasing huge quantities of mustard the last two years under the price support scheme. And now when prices of edible oils are ruling higher, this step might again lead to a situation wherein state agencies such as National Agriculture Co-operative Marketing Federation would have to intervene in the new marketing season," another official said.

India produces 6.5-7 million tonne of mustard seeds every year. The crop is sown around September-October and the harvest starts from late February.In 2005 and 2006, India produced bumper mustard crop, leading to sharp fall in prices and forcing NAFED to intervene under the price support scheme.

Since then NAFED has been trying to liquidate its huge mustard inventory but is still left with around 1.5 million tonne of mustard seeds.

"As of now NAFED has cut down on its mustard selling because of fall in edible oil prices and the move might further harm its mustard selling programme," the official said.