1. Allow liberal imports of oil-seeds

Allow liberal imports of oil-seeds

This will reduce the heavy burden from importing oil and facilitate the thriving of oil-cake exports

By: | Published: February 11, 2015 12:18 AM

Can we Make-in-India the bulk of edible oil that we need rather than allowing imports in massive volumes? Can we have a strategy or an enlightened niti (principle)to compress such volumes in the short- and long-term? Edible oil imports from Indonesia, Malaysia, Brazil, Argentina, the US, etc, are likely to touch 12 million tonnes in FY15—an escalation of 45% in quantity terms from 8.3 million tonnes in FY11—and at current prices, they could be $8.5 billion or R53,000 crore. A split-analysis of major oilseeds whose imports spiralled can be seen in the accompanying chart.

The cost of value-addition, of crushing of the seeds, is irrationally incurred and paid for because most of it happens abroad, while processing capacity is far in excess at home; this also, therefore, has consequences for employment generation. Against an annual consumption of 20 million tonnes for all types of oils from all varieties of seeds—palm, soyabean, rapeseed (canola), sun flower, rice bran, cotton seed. etc—the supply-side does not exceed 8 million tonnes. Resorting to massive import of oils is, thus, projected as a necessity rather than the result of flawed policies. Easy imports have veiled domestic supply-demand mismatch. Rational policy-makers cannot ignore the fact that with a rising GDP and improved life-styles, the additional demand of edible oil will have to be met, which will be a minimum of 1 million tonnes per annum. At this rate, by 2020, imports may be 18-20 million tonnes, of about $14 billion or R88,000 crore.

No reform action to decelerate the import-burden has been taken or initiated. Since the futures prices of palm oil dipped by $200 per million tonne and soya oil by $400 per million tonne in the last two years, the government just tinkered with import duties on the higher side at the behest of local industry. For example, these days, the price of locally-produced soya oil from Indian oilseeds is $180 higher than CBOT futures—about 26%. This emboldens inefficient production, which is a negative for the national food economy.

Edible-oil

Let us introspect on how this situation has evolved. There is relatively cheaper palm oil import from Indonesia and Malaysia on which the Indian industry and consumers have relied upon. This constitutes 70% of the total imports. But now, discerning consumers prefer superior variety of oils from beans, canola, and sunflower seeds. These could be crushed from GM (genetically modified) seeds as well.

edible-oils

The world has moved ahead with GM crops, while politically, and officially, doubts and confusion on GM strains prevail in India. The lab tests and field trials are pending. Our yields/production of oilseeds have not amplified, though agro-economists continue to debate on attaining higher efficiencies with inputs of fertiliser, power and water. Why can’t the inherent efficiencies of biotech revolution be an integral part of the tactical policy for higher productivity? Let producers/consumers be offered the choice between all forms of crops—conventional (with fertiliser usage), organic and GM. Why are the economies of scale and lower values attainable through advanced technology being denied to the people? Paradoxically, Indian imports contain oil crushed from GM seeds. We are using GM end-products while imprudently excluding the mother-ingredient from Indian agriculture.

China annually imports 74 million tonnes of soya seeds and imports almost negligible volumes of soya oil. The EU recently gave its member countries the option of choosing to use biotech seeds. Inhibitions, even environmental, against biotech crops are vanishing fast. Pending a final decision on the use of GM seeds, the solution lies in permitting liberal import of oilseeds—GM or otherwise—for being crushed domestically. The industry will produce edible oil and de-oiled seed cake for both for domestic and overseas consumption. To illustrate, India needs to import about 11 million tonnes of soya seeds to bridge the current gap of 2 million tonne of soya oil (about 18% recovery) in demand and neutralise oil import. This would provide 9 million tonnes of soyameal for trading worldwide. There will be net saving because of the absence of oil import and export of soyameal and the domestic prices of soya oil will also converge with lower international prices—and not reflect a disparity of 26%.

Solvent extraction industries may set up port-based plants for crushing beans with the intent to export meal and sell oil domestically—just as some sugar mills process raw sugar into refined sugar in the western and eastern coasts of India for export and local use. This is a win-win situation.

The author is a grains trade analyst.

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  1. V
    Vijay Anand
    Jun 15, 2015 at 2:39 pm
    Whats analysed in the article is very true - ground reality. If we calculate how much India can gain or in an other approach how much India is losing, I think things will be more glaring and will call for further examination. Convert this w story into a bunch of revenue figures. Oil is one big ticket revenue item for India
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