Billed as a big step towards taming inflation, the government?s much-touted subsidised edible oil distribution programme has been a non-starter as very few states have come forward to lift oil from the central pool.

In April this year, the government had announced the scheme to provide edible oil below market price to families below the poverty line. On July 28, Union agriculture minister Sharad Pawar formally launched the scheme in Andhra Pradesh.

But since, then officials said only few states like Andhra Pradesh, Orissa and Karnataka have lifted their quota of edible oil. The others have just not bothered. Due to the ?poor? response from states, only about 1.6 lakh tonnes of edible oil have been shipped to the country through public sector procurement agencies like Nafed, STC, PEC and MMTC, despite a government plan to push in one million tonnes of imported oil at a subsidy of Rs 15 per kg through the Public Distribution Scheme. A household is entitled to one kg of edible oil a month.

The current import is itself about 100,000 lakh tonnes short of the total contract of 260,000 lakh tonnes. Of the total shipped oil, too, only 50,000 tonnes have so far been distributed to various states, a statement by ministry of agriculture on Thursday said.

Experts said the scenario has changed because international prices of oil have fallen sharply. Consequently, local edible oil prices have come off their highs, making the sale of the subsidised oil unviable for the states. Crude palm oil prices have fallen from around 4,000 Malaysian ringgits a tonne in March 2008 to 2,600 ringgits now. (One ringgits is equal to about Rs 11.50).

According to an agriculture ministry statement, international prices of palm oil are down by $260 a tonne from April 2008.

?Logistical problems faced by the state governments have also been responsible for the poor response to the scheme,? an official with ministry of agriculture told FE.

Edible oil, which has a big weightage of around 2.7% on the wholesale price index-based inflation, surged by 80-90% in the last one year because of a spike in global rates. The biggest increase was in soyaoil and palmoil, two of the largest consumed edible oils in the country.

This prompted the government to announce the subsidised scheme after its move to slash import duties to nil for crude failed to check a steady rise in prices.

According to the agriculture ministry official, some states like Rajasthan and Delhi did show initial interest in lifting subsidised palmolein oil for distribution through PDS, later backed out as prices started falling.

?With such a poor response to the scheme, there is a possibility that the government might not even import the entire quota of 10 lakh tonnes of edible oils,? another source said.

?Beside the decline in prices, most states are not prepared to handle a permissible commodity like oil,? the official said.

FE reported in June that there was hardly any ?enthusiasm? by the states to lift the oil because of softening prices and that the subsidy of Rs 15 per litre was not that attractive as only one litre of edible oil per family has to be distributed while the real consumption was much bigger. ?The states also need to incur extra expenditure for storing and distributing the imported edible oil through PDS,? an official with ministry of agriculture had said.

However, the government came out with a statement that 1 5 states? have ?desired to participate? in the scheme. States. including Andhra Pradesh, Chhattisgarh, Gujarat, Himachal Pradesh and Madhya Pradesh, have been allocated edible oil by the department of food and public distribution under the ministry of agriculture.

Out of the 12 million tonnes of edible oil consumption in the country, more than 5.5 million tonnes are imported. The country imports around 2 million tonnes of soyabean oil from Argentina and Brazil, while about 3.5 million tonnes of palm oil is imported annually from Malyasia and Indonesia.