Agriculture Minister Sharad Pawar’s indication that the import duty tariff for edible oils would soon be reviewed has kicked up a predictable row. Contentious voices are being raised on the need for such a move, not only within the edible oils sector where the interests of different industry segments are mutually conflicting, but also from different government ministries. The issue turns all the more vexed when the disparate interests of oilseed producers and edible oil consumers are also taken into the reckoning. That explains why, on the one hand, solvent oil extractors are arguing for the re-imposition of, or a hike in, import duties that were either wholly abolished (as for crude palm oil) or drastically reduced in April in order to contain inflation. Vanaspati manufacturers, on the other hand, oppose such a move, since crude palm oil is the main raw material for vanaspati manufacture. The finance and commerce ministries, too, are believed to disfavour the agriculture ministry’s pro-farmer proposal for duty hikes as they are wary of stoking a fresh bout of price increases for an important item in the consumer basket. The forthcoming elections in some key states, including the major oilseed growing states of Madhya Pradesh and Rajasthan, have added yet another dimension, more so because voting is scheduled to coincide with the peak marketing of kharif oilseeds like soyabean and groundnut, and the fresh planting of rabi oilseeds, notably mustard. The balancing of the contrasting interests of producers and consumers, therefore, assumes paramount importance.
But that, of course, is easier said than done. It is true that the prices of edible oils have plummeted in the international market and, to a lesser extent, in the domestic market as well. The landed cost of imported edible oils has dropped in dollar terms by over 50 per cent in the case of palm-based oils, and over 35 per cent in case of soyabean oil. Even taking into account the erosion in the value of rupee vis-à-vis the dollar in recent months, which has acted as a de facto tariff mechanism, the fall in prices is enough to worry domestic growers. Besides, the country is still dependent on imports for meeting nearly 45 per cent of its cooking oil requirement, and therefore an impetus for greater indigenous production is imperative, in the form of price protection.
All this does not make an automatic case for reimposing tariffs; indeed, the arguments against imposing an import duty cannot be dismissed lightly. Still, some signals for stemming a further decline in oilseed prices may be advisable in order to avert any adverse fall-out on rabi oilseed plantings. For this, the government can consider abrogating some of the retrograde steps taken by it when edible oil prices were hitting new peaks. The removal of stock limits, imposed by the governments of states like Maharashtra, Andhra Pradesh, and Karnataka on the advice of the Centre, for instance, can help bring the oil-based industry back to mandis. Lifting of the bar on edible oil exports, too, can send positive signals to the market without actually involving any significant outgo of oils, barring consumer packs of branded high-value oils, in view of the prevailing global market scenario. Such steps will help support farmers, but without a significant cost-push impact as increased stocks with the trade will help keep prices stable, to the satisfaction of most stakeholders in this sector.
