Edible oil, pulses imports to see little change despite increase in minimum support price

Written by fe Bureau | New Delhi | Updated: Jun 29 2013, 09:35am hrs
The government's decision to increase prices of tur and oilseeds by up to 15% to boost domestic output is unlikely to reduce reliance on imports significantly, industry experts said.

This is because government procurement of pulses is too low and imports are also growing due to a steady rise in domestic consumption. Similarly, although farmers may be prompted to plant soyabean more following the hike in the minimum support price (MSP) of the commodity, edible oil imports are still cheaper.

Despite that, the steps initiated by the government--less rise in the MSP of paddy and more hike in the prices of oilseeds and tur--is a step in the right direction and will yield results if supported by other fiscal and administrative measures, they said.

"The sharper rise in the MSP of yellow and black soyabean than paddy is a sign that the government wants to encourage the farmer to grow more oilseeds. But the MSP is one of the tools to step up production and will work effectively only when it is backed by other measures, including ensuring cheaper supplies of farm inputs," said Solvent Extractors' Association (SEA) executive director BV Mehta.

"The government needs to come up with policy measures to ensure that domestic edible oil prices are kept in a certain band so that the financial health of the industry remains in good shape while farmers get good remuneration. It also insulates the farmers from price fluctuations abroad," he added.

Already, edible oil imports have become cheaper by around 25% from a year before due to bumper oilseed harvest globally. This means imports may continue in large volumes. Imports are expected to remain strong, especially from July to October, to cater for demand during the festival season when domestic oil-seed crushing goes through a lean phase. "Moreover, we are adding 20 million people a year and the country's consumption is growing at 3.5% annually, while domestic production remains stagnant. So I won't be surprised if imports will hit 14-15 million tonnes in five year," according to Mehta.

India's annual consumption is around 17.5 million tonne, and the country may produce around 7.5 million tonne of edible oil in the oil year through October, according to an industry estimate.

The Cabinet committee on economic affairs (CCEA) on Thursday decided to raise the MSPs of groundnut-in-shell, soyabean (black) and sesamum by Rs 300 per quintal each and fixed them at Rs 4,000 per quintal, Rs 2,500 per quintal and Rs 4,500 per quintal, respectively. The benchmark price of soyabean (yellow) has been increased by Rs 320 per quintal to Rs 2,560 per quintal. The MSPs of sunflower seed and nigerseed have been retained at last year`s levels of Rs.3,700 per quintal and Rs. 3,500 per quintal, respectively, an official statement said.

The country imports more than half of its annual edible oil requirements and roughly one-fifth of its pulse needs, and the two commodities account for a bulk of its processed food item imports.