The Union ministry of food has recommended continuing the subsidy for edible oil distribution, given the rising trend in prices and anticipated shortfall in final production in the kharif season.
The subsidy scheme under the public distribution system involves distributing edible oil at Rs 15 per kg to individual states. The scheme is to end in September.
Sources say barring seven to eight states, this scheme is not being used by others. For instance, Kerala does not want to upset the price of coconut oil, widely used in the state. Similarly, West Bengal is not part of the scheme. Maharashtra, Andhra Pradesh and Karnataka are among those using it. The ministry has started talks for the scheme’s wider acceptance, as edible oil prices are expected to go up in the coming months.
The fourth advance estimates released by the government last week had forecast production of 30 million tonnes of oilseed, as compared to the targeted production of 33.6 mt. The final estimate for output in 2010-11 is 32.4 mt. While this forecast includes both the kharif and rabi crops, estimates for the former project an output of 20.8 mt (target of 22.1 mt). Last year, the kharif final estimates were 21.9 mt, ahead of the fourth advance estimates of 20.8 mt.
Besides, after a tariff increase on the import of palmolein oil, its prices are up in the domestic market by 10-20 per cent across the country. The government defreoze the tariff value on imported RBD palmolein from $484 a tonne, and aligned it with current international prices and scrapped the proposal to lower import duty rate on refined oil.
Barring groundnut oil, which ruled steady, all other edible oils have shot up, at par with higher import parity due to revision of tariff values.
Official sources said even if palmolein prices in the international markets had been rangebound, the rupee’s sharp depreciation against the dollar was another factor which wa increasing the import cost and, subsequently, cost to the domestic consumer.
In the domestic market, according to the fourth estimates, the affected oilseeds are groundnut, rapeseed, mustard seed and sunflower.
For the kharif, groundnut production estimates are 5.1 mt (target of 6.8 mt), while total production is estimated at 6.9 mt (8.8 mt). Similarly, for rapeseed and mustard seeds, the estimated production was 6.7 mt (target of 8.2 mt). The sunflower kharif crop estimate is 141,000 tonnes (276,000 tonne target).