Concerns with Vegetable Oil Imports

What is the issue?

• Indian vegetable oils imports in volume and value terms have skyrocketed.
• Union government must take right measures to protect the domestic producers.

How import dependent is India in this regard?

• India’s imports vegetable oil to about 14 million tonnes.
• This is of approximately $11 billion (over Rs. 70,000 crore) worth.
• In value terms veg-oil imports are next only to crude and gold.
• It is the highest for any food commodity.
• India’s import dependence in this has worsened to over 70%.

What are the concerns?

• Farmers - Oilseed growers in India are in distress as a result of increased imports.
• The planted acreage has stagnated and the yields also continue to be abysmally low.
• This is primarily because growers have no incentive to improve agronomic practices.
• The marketability of the crop grown is also weak as the price support mechanism is nearly non-existent.
• Market - Liberal policies with zero or low rate of duty and free market operations of the last 25 years have contributed to unfettered imports.
• This has worked against protecting the interests of domestic growers.  
• About 10-15% of the current import volume is speculation driven.
• It often represents stock transfer from Indonesia and Malaysia to India.
• Huge inventories of as much as 2 million tonnes are often piled up in India, in turn affecting the domestic market.

What measures need to be taken?

• Ceiling on veg-oil imports - A ceiling on veg-oil import will reduce the quantum of arrivals and support domestic producers.
• Ceiling should come with the provision to review it every 6 months, depending on the exigencies of the situation.
• Monitoring imports - Imports have to be closely monitored in terms of registration of contracts, tracking arrivals and so on.
• This can help make the trade more transparent.
• It can also help policymakers with real-time information for taking informed decisions proactively.
• Reduce long credit period - Many Indian importers often enjoy a long credit period
• They have 90-150 days for the payment of the value of the cargo to overseas suppliers.
• This encourages over-trading and fosters an unending loop of imports.
• Reducing the credit period could address this.
• Dynamic tariffs - Import duties should be varied dynamically.
• It should be fixed in a way so that imported oils are not cheaper than the MSP for domestic oils.

Source: Business Line