Sher Singh Sangwan
THE Department of Food and Public Distribution told leading industry representatives last week to pass on the benefit of a reduction in the prices of edible oils to the consumers. Consequently, the apex industry body, the Solvent Extractors’ Association of India, appealed to its members to reduce the retail and wholesale prices in line with prevailing global markets for the benefit of the end users.
The international prices of imported edible oils are witnessing a downward trend. Global prices have reportedly fallen by $200-250 per tonne in the past two months. India is the world’s second-largest consumer and number one vegetable oil importer; it meets 60 per cent of its requirements through imports. A major portion is accounted for by palm oil and its derivatives, which are imported from Indonesia and Malaysia. India mostly consumes mustard, palm, soyabean and sunflower-derived edible oils.
During April 2022, mustard’s all-India average price per quintal was Rs 6,658 compared to the minimum support price (MSP) of Rs 5,050; the average price in April this year was Rs 5,209 against the MSP of Rs 5,450. As per reports, in the first week of May 2023, the mustard prices were as low as Rs 4,300-4,500 per quintal in the largest producer state of Rajasthan, where procurement at MSP has not been started. Procurement was stopped in Haryana due to a glut in the Agricultural Produce Market Committee (APMCs) mandis. On an average, farmers in India are getting Rs 1,600-1,700 less per quintal as compared to last year. The estimated all-India production in 2023 is about 129 lakh tonnes; hence, rapeseed and mustard seeds will fetch about Rs 21,000 crore less to Indian farmers than their income in the previous year.
A question arises: how did the prices of mustard come down within 4-5 months from about Rs 6,000 despite its domestic production having recorded a steady growth? The crash in domestic prices may be largely attributed to an unprecedented increase in the imports of oilseeds since November 2022. At that time, the edible oil prices were quite high in India, causing a higher inflation, whereas international prices of oilseeds have nosedived due to good global production. With the aim of reducing oil prices, the Central Government, through a notification issued on December 30, 2022, allowed imports of lentils and vegetable oils such as palm oil, soya oil and sunflower oil at a lower tax rate for one more year (till March 2024). We have been importing about 60 per cent of our vegetable oil requirements every year and its low international prices tempted Indian oil companies to import about 16.61 lakh tonnes from November 2022 to March 2023. It was about 26 per cent more than our usual imports of edible oils. It served the purpose of the Central Government to reduce inflation and of domestic oil companies to indulge in profiteering as CIF (cost insurance and freight) prices of imported vegetable oils were about Rs 80 per kg compared to about Rs 170 per kg in India. Though there was some reduction in the retail prices of oils, the decrease was less than the lower import prices and that too after a time lag. It may have given windfall gains to major oil companies. Further, the wholesalers and big chain retailers of edible oils were exempted from the stock limit from December 31, 2022, through a notification of the Union Ministry of Consumer Affairs. It resulted in an increase in the vegetable oil stock to 34.47 lakh tonnes as on April 1, 2023, compared to 21.43 lakh tonnes on April 1, 2022. It has caused a collapse in the prices of mustard in its peak marketing months of April and May 2023. These facts indicate that the policy of higher imports has failed to gauge the likely adverse impact on farmers and our goal of achieving self-sufficiency in oilseeds.
Farmers in India, especially in Haryana, have responded positively to higher MSPs and higher market prices of mustard since 2019-20. Even the increase in the yield of mustard has been consistently high in recent years. The higher yield has led to an increase in the area and production of mustard. Some area in paddy-wheat districts was shifted to mustard by many farmers in the past two years. But the biased Price Support Scheme (PSS) policy for oilseeds with a cap on quantity to be procured at MSP (up to 25 quintals/farmer), irregularities in implementation (not an annual feature compared to wheat and paddy) and the crash in market prices may dampen the enthusiasm of farmers to divert more area from wheat to mustard. It is to be noted that the procurement of mustard at the MSP is partially undertaken by states such as Haryana and there is no such regular practice in the biggest mustard-producing states, including Rajasthan and Uttar Pradesh. The Central Organisation for Oil Industry & Trade (COOIT) had estimated that India’s mustard seed production had risen by 29 per cent to 109.5 lakh tonnes during the rabi season of 2021-22 crop year. The output of mustard seeds was 85 lakh tonnes in the previous year.
Therefore, to maintain the momentum for achieving self-sufficiency in oilseeds, the government should start oilseed procurement at the MSP in all major producer states without any cap on quantity, like that for wheat and paddy. In future, while allowing imports of oilseeds, the interests of domestic producers should not be ignored by calibrating the quantity to be imported. It may nudge our farmers towards balanced agricultural production that can eventually make us self-reliant in oilseeds.
The author is a former Professor, SBI Chair, Centre for Research in Rural & Industrial Development (CRRID), and former GM, National Bank for Agriculture & Rural Development (NABARD)
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