The Hindu Business Line : Large vegoil imports a cause for concern

WITH the arrival of an estimated 5.13 lakh tonnes (lt) of various edible oils last month, total imports during oil year November 2003-October 2004 registered were 44 lt, as per figures compiled by the Solvent Extractors' Association of India (SEAI).

Of this, the palm group of oils accounted for 78 per cent (34 lt) and the rest soft oils. The former improved its share, which was 74 per cent (38 lt) the previous year on higher aggregate imports. Crude oil imports in 2003-04 were 82 per cent (36 lt), down from 93 per cent (47 lt) last year.

In other words, crude oils still dominate the import basket, providing sufficient comfort to the industry that had vehemently objected to reduction in customs duty on refined palm oil. The extant duty structure appears to provide a reasonable and level ground for processors and merchants.

Interestingly, import in 2003-04 discloses a 7-lt decline from the record arrival of 51 lt in the previous year. However, the significance of these numbers is not so much in how much crude or refined oil came in or what was the share of palm vis-à-vis soft oils.

A quick look at the import numbers of last six years published by SEAI is sure to bring anyone to an unmistakable inference — that far from improving, the country's import dependence for edible oils is actually worsening, save for occasional improvement such as the one seen in 2003-04.

Whatever be the level of indigenous production of oilseeds and in turn oils, the country would be required to import and would surely continue to import no less than 45 lt of various oil every year. If anything, this supply gap is likely to widen in future.

Every year, the country incurs an enormous amount of expenditure in foreign exchange — estimated at Rs 8,000 crore to Rs 10,000 crore depending on international prices — to bridge the supply gap. In the process, the exchequer collects revenue in the form of customs duty to the tune of Rs 5,000 crore.

Who is winning because of these imports? There seems to be false sense of win-win among both policymakers and industry alike. Huge foreign exchange reserves have emboldened the Government to adopt the easy option of imports purportedly to support the consumer.

On the other hand, the industry, mainly refiners who have made investment in creating massive capacities (even when capacity utilisation of existing units was not high) seem to be happy with imports because their entire economics is dependent on continuing imports.

The existing mismatch between domestic demand and indigenous supply is expected to worsen in the coming years because neither the Government nor the industry shows any seriousness about raising indigenous production.

Huge foreign exchange reserves have probably brought a sense of complacency among policymakers. As for the industry, it is drifting without direction, attempting to fight day-to-day operational challenges without a concern for the long term.

Demographic pressure and rising incomes push demand for all food products including edible oils up continually. Demand for edible oils is projected to grow by 7-8 lt a year if the economy registers a GDP growth rate of around 6 per cent per annum.

Even to freeze edible oil imports at the existing level, we need to plan for production of an additional 7-8 lt of vegetable oil per annum, which roughly translates to an incremental production of about 25 lt of oilseeds.

There is not a shred of evidence that the policymakers or the industry is seriously working towards enhancing indigenous output. Major producers and suppliers of vegetable oil to India have reason to be pleased with our performance on the oilseeds front. An already huge, yet growing market is available to them, and will remain open for long years.

More Stories on : Oilseeds & Edible Oil | Exports & Imports

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Price fall, higher input costs hit cement cos in southern region

i-flex acquires Equinox; to buy 33 pc stake in French firm

Gold at all-time high

Large vegoil imports a cause for concern

Govt looking at merger of PSU general insurance cos

ICICI Bank hikes deposit, lending rates

More freedom for co-operatives, says Manmohan