Recent surge in edible oil prices has already melted the pandemic-stricken wallets of common people. Unlike global market, these prices in import depends India is a product of interplay among tarriff, oilseeds production, and consumer demand within and outside global market. To understand the ongoing game of edible oil prices in India, thoroughly causal analysis of above factors become inevitable.
Present status of edible oil global market
According to FAO, the current global edible oil market is $97 billion dollars and is expected to reach upto $120 billion by the end of 2025.
Most importantly, in the projected growth, the role of developing nations would be much more than others. After China, India is going to contribute to the growth of edible oil demand.
India’s edible oil import dependency
It is vital to know the ongoing game of edible oil prices. Consumption wise, India is the third largest consumer after US and China, and expected to increase its share in future.
However, in terms of import, India is the largest net importer of vegetable oil in the global market. Presently, India constitutes one-fifth of global import with 15 million tonnes annually.
Ironically, despite being the world’s largest oilseeds producer, it is forced to import from outside with huge quantity. Hence, this is bound to reflect in the prices of domestic market in case of rising global prices.
Factually, out of total import, Palm oil constitutes nearly 60 percent of India’s total import. Annually, it is bound to import 60 percent edible oil of country’s total consumption.
In terms of numbers, India consumes around 26 million tonnes of edible oil annually (2020). Of which, it hardly afford to produce 10 million domestically.
Last year, country’s edible oil bill was almost half of the total agri import.
Government trade policy regarding edible oil prices
As per the government sources, country banned export of edible oil since 2008 to ensure easy availability and affordability for consumers.
But, occasionally, India exported non-GM soya products to other nations. In 2021, government exported 19 lakhs soya-meal to other nations as per the government sources.
Secondly, when the country import huge quantity of oil, why is there unbearable import tarriff on it?
Logics of custom duty on import of edible oil
Recently, government has reduced tarriff on edible oil import to give certain amount of relief to reeling consumers. Still, it is around 25 and 35 percent on the crude and refined oil.
Finance minister of India claimed that if we remove custom, the prices of oil will rise in the global market.
Further, she added that such revenue will help us to boost the domestic edible oil industry or self sufficiency in oil in future.
Shockingly, Indonesia and Malaysia, two major exporters of Palm oil to India, just increased export duties to help domestic players. It means that Indian consumers are sand-witched between domestic and global taxation.
Surprisingly, without offering reasonable MSP for oilseeds, strengthening infrastructure, and technology interventions, mere slogans and missions might not lead nations to achieve aspired goals.
No compensation for consumers and low MSP for farmers
Logically, in order to make nation self sufficient, production as well as productivity of oilseeds is the only thing we can do. For this, monetary in incentives should be given to farmers by linking custom to MSP.
Understandably, it is not bad idea to hike MSP for farmers to cultivate oilseeds. In recently, it is also supported by Solvent Extractors Association of India (SEA).
On the other hand, demand for subsidisation of oil for vulnerable section through PDS might relieve theirs pain and agony.
Unfortunately, both things are out of focus for government of India.
Unresolved oilseeds production bottlenecks
Priority-wise, foodgrains and plantation crops constitute majority of quality net sown area. Traditionally, oilseeds are restricted to plateau regions without adequate irrigation means. Therefore, it has direct impact on the productivity and production.
As a result, despite suitable climatic conditions for 7 oilseeds, Indian farmers practice only 3 oilseeds including, soyabean, mustard, groundnut. These three constitute 90 percent of oilseeds production annually.
Thirdly, erratic monsoon is permanent hurdle for kharif oilseeds crops. Nearly, two-third production in India is taken from kharif crops. It highlights the need for irrigation to avoid losses of untimely droughts.
Geographically, oilseeds production is concentrated in the drought prone areas of peninsular India. Finally, country need to increase both area and productivity to meet soaring domestic demands.
Currently, country produces 32 million oilseeds in 26 million ha. areas. By studying all these things, one could easily understand the ongoing game of edible oil prices in India.
Last thought on game of edible oil prices,
So far, we have learnt that government have enough revenue collected by the means of custom but hardly diverted to needy farmers and consumers. It can’t escape by citing price rise in the global market.
Next, productivity is age old issue that country inherited ever since independence. And, it is eagerly waiting to resolve with micro-irrigation, quality seeds, and monetary support. But, waiting seems everlasting.
Undoubtedly, on the name of protecting domestic edible oil industry and self sufficiency in future, present consumers cannot be left on the mercy of hope.
At last, a right blend of compensation, monetary incentives, and technology interventions might offer healing touch in near future. Otherwise, to gain few, sacrifice everything may prove detrimental. This is all about the mechanism of edible oil prices in India.
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