Currently, the situation has improved for the domestic industry due to two reasons. Firstly, the traders who had booked large quantities of oil from overseas exporters when international prices of oil had gone down, have now gone slow on their bookings.

That is mainly because excessive imports had resulted in a glut in the market and traders realised that it was wiser to import lower quantities. Imports, therefore, are now coming in a slow and steady manner.

Secondly, the festive season has increased the demand for oil and vanaspati. It is naturally the best time for the industry to sell its products. Unfortunately, the picnic is not going to last forever. When the festival season ends, the demand would taper off again.

Further, if international prices fall, traders would increase imports. "The sudden ups and downs in the industry will not do any good to the economy. It is high time that the government comes up with a policy which would provide stability," said IR Mehra of Indian Vanaspati Producers Association (IVPA).According to Mehra the government should focus on providing technology to farmers to improve the quantity and quality of oilseed production. "This would lead to optimum level of capacity utilisation by the domestic industry. The technology mission on oilseeds should be revamped," he said.

Mehra added that the government's policy should be such that there is neither a deficit nor a surplus supply of oil in the market. The country should certainly import if domestic production is not sufficient, but the government should also ensure that the market is flooded with imports and the farmers get their due price.

The industry went through a similar dark patch a few months back when the country imported one million tonne oil in excess of the estimated deficit. Because of decrease in global prices of edible oil due to high production oil import during the first seven months of the current oil year (November 98 to April 99), oil import was nearly 320 per cent higher than imports during the same period of the previous year.

This resulted in a dip in domestic prices by over Rs 7,000 per tonne for major categories. Farmers too were forced to sell oilseeds at prices below the minimum support price. "This kind of a situation is not desirable for the farmers and there are chances that they may shift to some other crop in future," Mehra said.

The situation is also not desirable from the government's point of view as it spends a huge amount of foreign exchange in importing oil every year. Mehra suggested that the government should come up with a flexible policy which would allow import duty to vary in relation to the domestic situation. "When there is a scarcity in the domestic market the government should decrease the import duty and when there is enough domestic supply the government should increase it," he added.