Less rainfall to force India’s import bill of edible oil to USD 14 billion this year: ASSOCHAM study

edibleoilNew Delhi: India’s import bill on account of edible oils is likely to shoot up to USD 14 billion in the current financial year from USD 9.3 billion in 2013-14 as production of oilseeds would be hit to be extent of at least 8-10% due to deficient Monsoon rains as predicted this season, an ASSOCHAM paper has pointed out.

As per the initial indications, the rainfall in the edible oil growing states of Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Karnataka, Tamil Nadu, West Bengal and Andhra Pradesh would be deficient due to “El Nino factor” hitting the output which in turn will result in higher import dependence on the edible oil.

The chamber Secretary General, Mr. D S Rawat while releasing the study says, “the demand of edible oil will continue to grow by 15% per annum due to increasing income levels and fast changing eating habits in rural India. The demand for edible oil is likely to touch 203.54 Lakh MT during 2014-15. Import bill may also likely to touch around US $14 billion, result in hike of domestic prices if adequate and timely corrective measures were not taken”.

The ASSOCHAM paper on “India’s likely tryst with Edible Oil: Impact of El Nino factor” reveals that the country imported edible oils worth US $9.3 billion during the 2013-14 fiscal, a fall from US $11.2 billion during 2012-13. Despite increase in production of edible oils in the country, close to half of its domestic requirements are being met by imports.

Mr. Rawat said that India faces drought prospects every fifth year, the last one being in 2009, indicating a possible drought in 2014 in areas potentially receiving less than 10 per cent rainfall. Typically, El Nino conditions lead to either delay in the arrival of monsoons or deficient rainfall in the beginning of kharif season (June-September). India has been heavily dependent on imports for vegetable oils and pulses.

Mr. Rawat also emphasised on policy prudence, stressing the need for expanding the farm insurance cover and suggested the government advice banks and financial institutions to settle crop insurance claims in the drought hit areas without delay. He also called for making good the shortfall of oilseeds and pulses and liquidation of the extra stock of foodgrains.

As for the domestic production of oil seeds, prominent oil seeds that India produces are soyabean, rapeseed, mustard and groundnut. Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Karnataka, Tamil Nadu, West Bengal and Andhra Pradesh states are the key producers of oil seeds in India, adds the paper.

The 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 is too un-remunerative to enthuse farmers for intensive oilseeds cultivation.

A vibrant and efficient processing sector is a pre-requisite for the optimum growth and development of oilseed economy. India’s oilseed processing sector has been plagued by a slew of technological and policy issues culminating in the existence of a processing sector low in efficiency and capacity utilization. If the oilseed cultivators have to be linked in an economically viable and sustainable manner to the oilseed value chain, the role of oilseed processing units cannot be underestimated. The Indian oilseeds processing sector is fragmented, small-scale and suffers from low capacity utilization, adds the paper.

Industry players maintain adequate stocks to achieve optimal capacity utilisation during the offseason, making their operations highly working capital-intensive and raising stockholding costs. This practice also increases price risk to some extent, since the industry could face volatility between the procurement of the inputs and the sale of the outputs, impacting margins, highlights the paper.

Thus the marketing of oilseeds and their products is subject to a high degree of exploitation, and is self-degenerating.

ASSOCHAM further suggested that the edible oil industry should take initiatives to increase oilseed production by promoting contract farming in this sector, co-ordinate the modernization of oilseed production, processing, and the marketing of vegetable oils, oilseeds, and by-products, in areas covered by the project.

The chamber further said, procure and market 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. Also, increase the opportunities for productive and remunerative employment in the selected major oilseeds growing areas; one of the options could be encourage shifting of crop from grains to oilseeds by offering higher MSP.

Allocate funds required for the establishment of a modernized oilseeds and vegetable oil industry based on oilseed growers’ co-operatives, which will put the functions of oilseeds processing and marketing into the producers own hands.

Devise and implement a programme of investment and development that will enable growers to increase their oilseeds production, and their returns, while also increasing the efficiency of the processing and marketing functions, through the growers’ own co-operatives. Availability of high yielding quality seeds at the time of sowing.

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OdishaInc Bureau