In a memorandum sent to agriculture minister Nitish Kumar, the Solvent Extractor's Association (SEA) has said that since one of the aims of the agricultural policy was to review the tax structure on food grains and other commercial crops, it should also address tax problems faced by the edible oil industry.

SEA president Sandeep Bajoria pointed out that last year the state governments under the uniform sales tax drive had imposed 4 per cent sales tax on oilseeds and all its derivatives which earlier stood at 1-2 per cent in most states. At the same time, essential commodities like rice, wheat, pulses etc were put under the zero per cent category. The current tax on oilseeds sector with its multiple effects at each stage of edible oil production was acting as a discouragement for oilseeds farmers, Bajoria said. "As oilseed is also an essential commodity, it should be exempted from sales tax and be placed under zero per cent sales tax category."

He further pointed out that for producing refined edible oil, the domestic oilseeds sector had to pay sales tax at various points. Sales tax totalling 12 per cent had to be paid on the purchase of oilseeds, production of raw edible oil and production of refined edible oil. If the solvent extracted oil was refined the total tax to be paid increased to 16 per cent.

On the other hand, Bajoria said, there was a tax of only 4 per cent on imported refined edible oil giving it a distinct advantage over the the domestic industry. This resulted in farmers realising lesser value for the oilseeds produced by them. "The new farm policy must address such issues and correct the anomaly to safeguard the interest of domestic oilseeds farming community".

Making a case for the need for policy decisions to encourage farmers to switch over to the cultivation of oilseeds, the SEA pointed out to the minister that in case of rice and wheat there was a problem of plenty and the government faced difficulty in its procurement and storage. However, in case of oilseeds and pulses, the production was much below requirement and the country was compelled to import to meet the growing demand.

By ensuring remunerative prices for oilseeds to farmers, the government should encourage them to grow more oilseeds which would help in containing imports, the association said.

The new farm policy suggested that private sector participation should be promoted through contract farming and land leasing arrangements to allow accelerated technology transfer, capital inflow and assured markets for crop production, especially of oilseeds, cotton and horticultural crops.Bajoria said that in the case of oilseeds sector, contract farming could be introduced only if states amended present land laws. "The Centre should ask states to amend their land laws at the earliest to allow big companies to participate in oilseeds farming."

With the removal of quantitative restrictions on import of most of the commodities on the cards, the new farm policy has recommended the formulation of commodity-wise strategies and arrangements to protect farmers from adverse impact of undue price fluctuations in the world market and promote exports.

While welcoming the step, the SEA said the government should ensure remunerative prices to farmers for their produce to encourage farming. The association said that in case of oilseeds, the excessive import of edible oils in last few years had seriously affected the farmers and the industry.In the last two years, major crops like soybean, rapeseed and sunflower were sold below MSP during the season and the government was forced to undertake support operations. According to SEA, this had a negative impact on farmers and acerages shrank.

Bajoria said the government must take steps to regulate excessive import of edible oils by putting in place an appropriate tariff structure.In the letter to the agriculture minister, Bajoria emphasised that the industry was ready to offer remunerative price to farmers provided edible oil prices in the country remained at a reasonable level. "The new farm policy must formulate specific strategy for oilseeds sector for overall development."