Characterised by low yields and poor policy support, edible oil industry faced yet another challenge last year – the decision of Indonesia to encourage their processing industry reducing duties on export of processed oil. This single decision threatens the very existence of Indian oil industry.

Rattled by this decision, the Indian industry wants immediate corrective measures to come to its rescue at least in 2012.

“It is not just for the interest of the industry. It in fact is needed to reduce huge oil bill that is assuming serious proportions. During November 2010 to October, 2011, the country must have imported 90 lakh tonnes of edible oil costing Rs 35,000 crores,” an office-bearer of Solvent Extractors’ Association of India, said.

There are15,000 oil mills, 600 solvent extraction units, 600 vegetable oil refineries and 250 vanaspati units in India. While the domestic turn over of the vegetable oil industry is over Rs1, 00,000 crore, import-export turnover is put at about Rs 50,000 crore a year.

Oilseeds in India are grown mainly on marginal and sub-marginal lands under low input usage. Only 25 per cent of crop is irrigated, leaving the sector exposed to weather-related yield risks. Over decades, this marked the oilseed sector, forcing the country to continuously depend on imports. Our yields at 1,000 kg a hectare is less than global averages, an expert pointed out.

“It is therefore very essential to increase the availability of vegetable oils from domestic resources by encouraging diversification of land from food grains to oilseeds, increasing productivity of oilseeds and fullest exploitation of non traditional domestic sources,” Mr B V Mehta, Executive Director of the association, felt.

The association has already submitted a detailed wish-list for 2012 to the Union Government, asking it to address them in the upcoming Budget.

“We have to begin somewhere. We have to do something to improve capacity utilisation, increase production and productivity to make the Indian industry compete international market,” Mr Sushil Goenka, the President of association, said.

The industry asks the Government to earmark at least Rs 7,500 crore in the next three years to expand the area under oil palm cultivation. “Last year’s allocation of Rs 300 crore will have a very little impact to meet the demand in oilseeds and hardly sufficient to make the country self-sufficient in edible oil sector,” he said.

The industry feels that it has got a role in addressing the problems. It thinks it needs to enter oilseeds extension programme to provide farmers with necessary agri inputs to achieve higher productivity level. “We suggest that weighted Income Tax deduction should be granted to companies undertaking such programmes,” he felt.

Indonesian impact

The industry is nervous about the likely fall out of implementation of a new tax structure on export of of palm oil and by-products in Indonesia. The structure, which came into being in September 2011, significantly reduces duties on export of finished product to 10 per cent (from 16.5 per cent to 10 p.c.) and on packaged products to just 2 p.c. on packed products.

This, the Indian industry thinks, would have a catastrophic impact on domestic mills as the new duty structure could discourage Indonesian traders to export raw product and encourage millers there to dump finished products in India.

The sites some figures here. In 2009-10, India imported 6.4 million tonnes of palm products from Indonesia and Malaysia. This included 5.2 million tonnes of raw oil and the rest being finished products.

“With domestic Indian refineries facing closure threat, there would be no takers for the crude palm oil produced domestically. This would impact farmers,” Mr Goenka said and asked the Government to revise immediately the tariff value to be in line with the current market prices and also raise the import duty on finished product to 16.5% from 7.5 per cent.

The association has asked the government to completely ban the import of edible oils in consumer packs.

>kurmanath@thehindu.co.in

Related Topics