Invite Malaysia for palmoil JVs instead of lowering import duty

ASHOK B SHARMA

The Prime Minister’s delegation to Malaysia does not seem to have done adequate homework before negotiating palm oil trade. It does not seem to have kept the interests of domestic industry and farmers in mind while holding talks. India would do well to resist Malaysia’s pressure to effecting a reduction in import duty. In fact, it would be more appropriate if India invited Malaysian participation for palm oil production in the country.

However, much is not expected for the betterment of the domestic edible oil sector from Prime Minister’s visit to Malaysia. The business delegations accompanying the Prime Minister are sharply divided on major issues. There are two separate delegations led by major industry associations, namely, the Federation of Indian Chambers of Commerce and Industry (Ficci) and the Confederation of Indian Industries (CII). Both these associations have a separate agenda.

While the Ficci delegation has no representative from the edible oil industry, the CII team has a sole representative in DP Khandelia, managing director, Khandelia Oil & General Mills Private Limited.

Malaysia is a major exporter of palm oil to India and the massive exports of this commodity have become a concern for domestic industry as well as the farmers. In the last oil year (November 1999-October 2000) imports of edible oils touch a record high of 45 lakh tonnes. In the current oil year, till March, 18.86 lakh tonne was imported, out of which 7.57 lakh tonnes was crude palm oil and 6.53 lakh tonnes refined palm oil. Oilseeds production has declined to 18.6 million tonnes in 2000-01 from 20.9 million tonnes in the previous year. Despite the prevailing situation, the interests of this vital sector are being ignored in the discussions in Malaysia.

Malaysia has made a major breakthrough in developing cost-effective technology for palm oil production. This is an opportune time to give a new twist to Indo-Malaysian cooperation by inviting Malaysian participation in the edible oil sector. This issue, however, does not find any place in the agenda for discussions by the two business delegations or the government.

On the contrary, the Ficci document states that a memorandum of understanding (MoU) is likely to be signed between Soft Systems Pvt Ltd and Petra group of Malaysia for automation of plantation industries in that country.

Another MoU likely to be signed is for a joint venture between RK Latex Pvt Ltd and Malaysian Rubber Development Corporation (Mardec) for enabling export of rubber and latex to overseas market. This joint venture envisages import of machinery and technical know-how into India to put up a world standard factory in Kerala for manufacture of natural rubber latex to be used in production of surgical gloves, examination gloves and catheters.

The proposed MoU in the rubber sector is a welcome one as it will help both domestic rubber growers and the industry. Such MoUs are required in the edible oil sector, too. India can exchange software expertise in return for Malaysia’s help towards developing our edible oil sector.

In India, about eight lakh hectares has already been identified as suitable for palm cultivation, out of which only 40,000 hectare is under cultivation. The pace of progress is very slow and Malaysia’s participation is negligible.

In Andhra Pradesh, out of the identified four lakh hectares, cultivation is done on 24,000 hectares. In Karnataka, out of the identified 2.50 lakh hectares cultivation is on 5,000 hectares, in Gujarat out of identified 61,000 hectares, cultivation is done on 233 hectares and in Tamil Nadu, out of the identified 31,000 hectares, cultivation is done on 9,000 hectares. There are identified areas in other states, including Assam, where the pace of cultivation is slow.

This is the right time to strike joint ventures for developing large palm oil estates and inviting liberal foreign direct investment (FDI). Oil production from fresh fruit branches (FFBs) of palm has twice the yield from any oilseed. Palm estates can bridge the demand-supply gap for edible oils in the country and reduce our dependence on imports to a large extent. Land ceiling laws should be amended to facilitate palm estates.
The move to effect a reduction in import duty on palm oil with a view to pleasing the Malaysians will be like bartering away the country’s interest at a stage when there is some effort to boost domestic production. Besides, the decision to hike import duty on crude palm oil to 75 per cent and refined palm oil to 85 per cent is consistent with agreements under the World Trade Organisation (WTO).

Under WTO, import duty on soyabean oil has been hiked to the maximum permissible limit of 45 per cent. If Malaysia has any resentment about our import duty being kept at a comparatively low level, they should join hands with us to fight for raising of the bound tariff rate on soyabean oil at the WTO meeting.

It is high time policymakers and administrators made efforts to rejuvenate the vital edible oil sector. Oilseeds and pulses are regarded as ‘orphan crops’, according to the director-general of Indian Council of Agricultural Research (ICAR), RS Paroda. The farmers grow these crops on marginal lands, without much encouragement. There are cases of farmers making distress sales of oilseeds despite the presence of minimum support prices as Nafed is not being able to carry out market intervention operations in time.
It is high time the edible oil sector was treated on a par with other cash crops, like tea, coffee, cotton, tobacco and sugarcane.