Any more hike in import duty may hike prices during festive season: ASSOCHAM

On the eve of Diwali and other festivals, the government is caught in a Catch-22 situation in balancing consumers’ interest with welfare of farmers who would like more protection by way of increased import duty but any such move may raise the risk of retail inflation, an ASSOCHAM study has pointed out.In any case, India’s import bill on account of vegetable oils is going to increase to USD 14 billion in the current financial year, against USD 10 billion in 2014-15, adds the ASSOCHAM paper.

“Due to weak global prices and glut in the international markets, prices in India have remained subdued despite a severe shortage of domestic production.  For the September, the CPI (consumer price index) marked annualized increase of only 3.6 per cent in the Oils and Fats segment.  The situation in edible oil imports is somewhat similar to the crude auto oil. However, unlike the auto fuel segment, the subdued prices have hit interest of farmers, while consumers have benefitted”, the paper noted.

So far the government has raised the customs duty on crude and refined edible oils to 12.5 per cent and 20 per cent respectively. While there is a demand for more such protection for the farmers, the move may lead to spiral in consumer inflation, which the government can ill-afford, learning from the pulses experience.

In the case of pulses, the supply-demand situation at the global level was equally bad in sync with the Indian production which has fallen owing to deficient rains.

“A major concern for the policy planners involved in ensuring the domestic availability of edible oils is the fact that domestic prices of oilseeds and vegetable oils are too un-remunerative to enthuse farmers for intensive oilseeds cultivation. That, in a way, is also coming in the way of the Prime Minister Mr Narendra Modi’s ambition of making India self-sufficient in the area of edible oils. After all, USD 14 billion import bill on account of cooking oil is a huge drain on the country’s foreign exchange,” ASSOCHAM Secretary General Mr D S Rawat said.

Edible oilseed production has been declining from 32.7 million in 2013-14 to 26 million tonnes in 2014-15, noted the study.

It is believed that reduced dependence on edible oil imports could be brought about by increased domestic oilseed production, but barring much stronger price incentives, production and yield improvements depend on improved plant varieties and cultivation practices. The oilseed economy of the country faces a host of challenges on technological, institutional and policy fronts and these not to be tackled effectively.

Among the suggestions made in the paper include modernization of oilseed production, processing, and the marketing of vegetable oils, oilseeds, and by-products, in areas covered by the project.  Procurement and marketing of  imported and indigenously produced vegetable oils in such a way as would contribute to the stabilization of supplies at levels that will be fair to consumer and growers.