What is the issue?
- Indian vegetable oils imports in volume and value terms have skyrocketed.
- Union government must take right measures to protect the domestic producers.
How import dependent is India in this regard?
- India’s imports vegetable oil to about 14 million tonnes.
- This is of approximately $11 billion (over Rs. 70,000 crore) worth.
- In value terms veg-oil imports are next only to crude and gold.
- It is the highest for any food commodity.
- India’s import dependence in this has worsened to over 70%.
What are the concerns?
- Farmers - Oilseed growers in India are in distress as a result of increased imports.
- The planted acreage has stagnated and the yields also continue to be abysmally low.
- This is primarily because growers have no incentive to improve agronomic practices.
- The marketability of the crop grown is also weak as the price support mechanism is nearly non-existent.
- Market - Liberal policies with zero or low rate of duty and free market operations of the last 25 years have contributed to unfettered imports.
- This has worked against protecting the interests of domestic growers.
- About 10-15% of the current import volume is speculation driven.
- It often represents stock transfer from Indonesia and Malaysia to India.
- Huge inventories of as much as 2 million tonnes are often piled up in India, in turn affecting the domestic market.
What measures need to be taken?
- Ceiling on veg-oil imports - A ceiling on veg-oil import will reduce the quantum of arrivals and support domestic producers.
- Ceiling should come with the provision to review it every 6 months, depending on the exigencies of the situation.
- Monitoring imports - Imports have to be closely monitored in terms of registration of contracts, tracking arrivals and so on.
- This can help make the trade more transparent.
- It can also help policymakers with real-time information for taking informed decisions proactively.
- Reduce long credit period - Many Indian importers often enjoy a long credit period
- They have 90-150 days for the payment of the value of the cargo to overseas suppliers.
- This encourages over-trading and fosters an unending loop of imports.
- Reducing the credit period could address this.
- Dynamic tariffs - Import duties should be varied dynamically.
- It should be fixed in a way so that imported oils are not cheaper than the MSP for domestic oils.
Source: Business Line
