The oilseeds processing industry in India, and specially the solvent extractions sector, has been clamouring for the grant of permission to import oilseeds for processing domestically. The basic argument runs as follows: against the total installed capacity of 10 million tonnes, the solvent extraction industry operates at barely 40 per cent of its rated potential. It is, therefore, advantageous to import oilseeds, process them domestically, and bridge the gap between demand and supply of vegetable oils by creating additionality of edible oils through such processing.It makes immensely more sense: (a) to import oilseeds and optimise utilisation of the processing capacity within the country rather than importing vegetable oils, and (b) to export oilmeals so produced and make the import of oilseeds a self-financing proposition, or nearly so.
This is indeed an excellent case on paper, which has a lot of logic and good business sense, as well as an attractive cost-benefit ratio for the nation.
Why on earthshould India support the vegetable oils processing industry at the origin by importing oils, while at the same time leaving huge capital resources in this sector idle and unutilised?
Stretched further in the line of logic it can be argued that if the solvent extraction industry within India is enabled to optimise its operations by providing throughput out of imports of oilseeds, economies of scale would set in and the industry would then be able to offer even better prices to the domestic farmer and in turn make the latter's operations similarly more viable.
Since the landed cost of imported oilseeds would be already loaded by freight and import tariff (if any), the Indian farmer will already have an adequate cushion against unfair competition arising out of more efficiently produced oilseeds coming from abroad. As a result of the additionality of edible oils that would be created in the proposed scenario, even the consumer would stand to benefit, assured as he would be of ample availability of cookingoils at reasonable prices.
When there is so much going in support of importing oilseeds as against vegetable oils, this should have been an open and shut case. However, the matter has dragged on inordinately with the mandarins in the union ministries of agriculture, commerce and finance.
Ostensibly, there is a general agreement among officialdom on the advisability of importing oilseeds in terms of the national cost-benefit ratio and "gross" acceptance of the logic behind the plea. "Gross", because it is understood that neither the industry nor the government has actually worked out the pluses and minuses in detail.
The industry has not offered a detailed cost calculation with regard to the landed cost of oilseeds sought to be imported, together with import tariff, if any, and additional freight involved for surface transport of oilseeds from the ports to the processing facilities located all over the country, with a heavy concentration in the soya belt of Madhya Pradesh.
Nor, for that matter, has thegovernment insisted on one. Moreover, the costs of processing the imported oilseeds and surface transport for returning the oilmeals to the ports for being exported have probably not been firmed up on paper.
If the industry wishes to obtain a favourable verdict for importing oilseeds, the viability of the entire operation in terms of actual costing, no doubt within a reasonable range in order to accommodate usual price fluctuations, must be established in an audit-proof manner. The government has a right to demand this and the industry has an obligation to provide the same to the entire satisfaction of the decision-making authorities.
Costing and viability apart, the case for importing oilseeds has faced a huge stumbling block from one of the most unexpected quarters. The Plant Protection and Quarantine Authorities have raised serious objections to importig oilseeds on the ground that some unwelcome strains of oilseeds may enter the domestic cultivation stream and create problems not to the liking of theplant protection authorities.
The views of the experts in the agriculture ministry in this area are so strong that they are unwilling to relent, notwithstanding the logic and commercial sense of importing oilseeds in preference to vegetable oils.
Since there is a serious objection on the part of some international consumers of soyameal with regard to genetically modified beans, fears expressed by Indian agronomists are not so easy to brush aside. Imports of vegetable oils have been significantly large, beginning with 12.5 lakh tonnes in the oil year (November-October) 1995-96, which went up to 17.5 lakh tonnes in 1996-97. It is poised to reach 19 lakh tonnes in 1997-98.
There is no gainsaying the fact that there are vested interests and strong lobbies against or in favour of importing vegetable oils in preference to oilseeds. The interests involved are: the countries exporting vegetable oils to India, the vanaspati industry which is a major user of imported soils for hydrogenation, the solventextraction industry, which is nursing a huge idle capacity which it would like to put to good use, the consumer, and last, but not least, the Indian oilseeds farmer.
Barring the poor consumer, it can be safely assumed that the rest of the interests enumerated above do have a strong presence and representation in their own overt and covert ways at all levels of the hierarchical decision making chain in the union ministries concerned. It would be interesting to reflect on the stance of these bodies of opinion, how their interests are hurt or hiked and the cumulative weight of the clout they have at various levels. But all that you will hear about on some other occasion. You are invited to watch this column.
(The author is secretary of the Groundnut Extractions Export Development Association. These are his personal views and not that of the association)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
