Trade body SEA has suggested the government to distribute edible oils at subsidised prices through the Public Distribution System (PDS), in a bid to give relief to the poor from rising edible oil prices.
Solvent Extractors Association of India (SEA) has also suggested the government to curb speculation in trading of oilseeds and edible oils on the commodity bourses and insisted on compulsory delivery contracts.
That apart, the Mumbai-based trade body said the government should freeze tariffs at lower levels, reduce agri-cess on imports and revisit customs duty reduction measures.
In a letter written to the Food Secretary Sudhanshu Pandey, SEA President Atul Chaturvedi said: “Last few months we have witnessed unprecedented price increase not only in edible oils but in practically all commodities across the world. Reasons for the unprecedented increase have been discussed umpteen times.”
Chinese buying, stimulus money, la Nina weather problems in palm and soya producing areas, labour problems in Malaysia due to COVID-19, aggressive bio-diesel thrust in Indonesia and renewable fuel from soybean oil in the USA and Brazil, etc, are some of the major reasons, he said.
He, however, said that though there are signs of bulls retreating, time will only tell whether it is ‘short-lived’ or going to be a permanent one.
However, to tackle the price rise in the short term, the SEA President said the government should “subsidise” edible oils by Rs 30-40 per kg through PDS. The port-based refineries have adequate spare capacity across the coastline of India for this purpose.
Currently, the central government distributes only foodgrains at subsidised rate of Rs 1-3 per kg via PDS to over 80 crore beneficiaries under the National Food Security Act.
Asserting that there is a need to curb speculation in trading of oilseeds/edible oils on commodity bourses, Chaturvedi said, “When oil prices were low around Rs 80-90 per kg. the volatility permitted by commodity exchange was 4 per cent… Now when prices have practically doubled, we should permit volatility only to the extent of 2 per cent during the day. This will curb excessive speculation.”
The exchange should allow trading in compulsory delivery contracts as this results in only serious players remaining active. “Once markets become normal, we can revisit this as speculators are also an integral part of the commodity exchanges,” he added.
SEA also recommended a freeze of tariff value on edible oils at lower levels. “Our back of envelope calculation says USD 200 per tonne reduction in tariff value would give relief of around Rs 5,000 per tonne.”
On import duty of edible oils, SEA said with international prices coming down recently, it may not be a bad idea to revisit duty reduction measures only after the Kharif oilseed planting is over to ensure no negative signals go to our oilseed farmers.
The trade body also requested the government desist from introducing the Essential Commodities Act as it can harm the supply chain terribly.
For the long term, SEA said the government should not only increase oilseeds cultivation on a mission mode but also create a buffer of edible oils to stabilize the price situation.
These suggestions were also placed before the meeting called by the Union Food Secretary on May 24 to discuss the “abnormal” increase in edible oil prices in India.