Burdened by massive import of vegetable oil amounting to 13-14 million tonnes and valued at over $14 billion to meet chronic domestic shortage, the government is keen to boost domestic production and reduce the dependence on imports.
In the medium-to-long term, the country must move towards substantial self-reliance, but in the short-term import is inevitable. But the present import policy, while advancing consumer interest, has failed to protect the interests of domestic oilseed growers.
Only a holistic policy that judiciously balances the interests of growers and consumers alike will work. Comprehensive policy action is required because of looming risks including land constraints, water shortage and climate change.
Six initiatives
Boosting domestic oilseeds production is inevitable, for which effective policy measures are critical. Six initiatives can help boost domestic production: (a) enforce area expansion through incentivised crop rotation in high-input grain mono-cropping regions of Punjab, Haryana and western Uttar Pradesh; (b) adopt multiple technologies including infotech, satellite tech, nuclear agri-tech and nanotech; (c) work towards a breakthrough in seed technology; (d) implement a robust nationwide procurement system; (e) tap the huge potential of non-conventional oil sources like cottonseed, rice-bran and tree-borne oilseeds; and (f) invest in improving crushing/extraction efficiency.
Each one of these is doable, and positive effects will be visible over time. But there is also need for some ‘quick wins’ for which six policy actions are recommended.
Regulate and monitor imports of vegetable oil. Currently, policy interventions are often knee-jerk and reactive, and bereft of supportive data. A simple administrative system of ‘Import Contract Registration’ and monitoring of arrivals will remove the opacity in trade and facilitate data-driven decision by New Delhi.
Cut down credit period to overseas suppliers to 45 days maximum. Long credit period of 90-120-150 days encourages over-trading and speculation. Some Indian importers are already in a serious ‘import debt trap’ because of rampant over-trading. Bank loans to importers can turn into NPA anytime. Reduced credit period will automatically slow the pace of import and make the importer more responsible and accountable.
Bring cooking oil under PDS. Support vulnerable sections of consumers with supply of edible oil under welfare programmes at subsidised rates. PDS and private trade supplies can co-exist. Both help advance consumer interest.
Allow oilseed import in partial replacement of vegoil import to derive multiple benefits. Import of oilseeds (in lieu of oils) will boost utilisation of domestic idle processing capacity; will augmented edible oil availability; and, importantly, willl make available more cake/meal for the domestic livestock sector or for export.
Create an Oilseeds Processing Industry Modernisation Fund. Many of the 15,000 oilseed crushing units and 800 solvent extraction plants are intrinsically inefficient in terms of scale, equipment, technology and productivity. A modernised industry will capture greater value and create potential to attract foreign direct investment.
Backward integration: Large processing units dependent on import must establish backward linkages to produce oilseeds by working with FPOs.
Much bet is being laid on oil palm cultivation, but history shows nothing remarkable has happened in the last 30 years. While the new oil palm initiative is welcome, a comprehensive review of the promotion policy is needed for sustained growth.
Finally, policymakers must demonstrate strong ‘political will’ to creatively disrupt the debilitating status quo. The country’s oilseeds sector deserves policy, investment and research support.
The article is excerpted from a speech delivered by the writer, a policy commentator and agribusiness specialist, at the International Conference on Vegetable Oils 2023