The Problem In Oilseeds

Updated: Jan 31 2003, 05:30am hrs
The Indian oilseeds market, rarely known for stability, has lately been passing through a volatile phase. This is good news neither for producers nor consumers. The average price of groundnut oil has gone up by 35 per cent during the calender year 2002. The recent flare-up in groundnut oil prices is due to a stand-off between millers and the government in Saurashtra, showing the unhealthy grip of millers on the edible oil economy. This must be broken by encouraging competition. In the near future, edible oil prices are unlikely to ease owing to an imbalance between demand and supply. The Food and Agriculture Organisation has forecast shortage of edible oils. The international market has already begun to react in a bullish way. The average price of soyabean oil has gone up from $378 per tonne in October-March 2002 to $552 per tonne in October-November 2002. Palmoil has firmed from $323 per tonne to $426 per tonne in the same period. Palmoil accounts for 84 per cent of Indias total edible oil imports. Thus, more imports will be required, as traders did not contract for sufficient quantities in anticipation of reduction in import duties. Low stocks, therefore, may drive up prices further. This scenario may worsen as acreage under oilseeds in the rabi season is feared to contract by eight lakh hectares. The resultant shortage will compel more imports of edible oils. Meanwhile, edible oil imports have gone up sharply from 2.08 million tonnes in 1997-98 to 4.42 million tonnes in 2001-02.

Heavy dependence on imports of edible oils reflects mismanagement of this sector. The resultant fluctuations in area under cultivation, production and yield per hectare of oilseeds during 1990-91 to 2000-01 calls for a rational restructuring of this vital sector. The production of nine major oilseeds has fallen from 24.4 million tonnes in 1996-97 to 21.1 million tonnes in 2001-02. It is not surprising that in recent years, edible oils that account for 60 to 70 per cent of total agricultural imports has emerged as the single largest import item. The government tried to dampen imports by raising import duties. But that does not address the basic malaise that affects oilseeds. Farmers need to be encouraged to grow oilseeds. This can be done by creating a separate monitoring agency that also looks into aspects like contractual farming, quality of seeds and coordination between farmers and millers. Much depends on good infrastructure and institutional support for marketing to ensure fair prices to farmers. Further, inviting foreign investment in oilseeds can also help. When major agribusiness companies such as Wilmer, the palm oil conglomerate, Cargill Asia Pacific, or Bunge, the worlds largest soyabean crusher, make India their main base, oilseeds producers may be able to look forward to better prices and consumers to better quality edible oils.