It will reduce the demand-supply gap, boost output
Business Standard / New Delhi Jun 12, 2009, 00:56 IST
The plea by an edible oil industry body for fixing an indicative price band within which the domestic prices of cooking oils are allowed to float without any import tariff modifications, makes immense sense. Such a band would be delineated while keeping in mind the interests of both oilseed growers (remunerative prices for their produce) and consumers (cooking oil at reasonable prices). This kind of a stable, yet realistic, price regime can incentivise farmers to grow more oilseeds and thereby serve to reduce the country’s growing dependence on imports for meeting rapidly growing demand. Import dependence has risen to over 55 per cent, with imports surging to nearly 8.5 million tonnes (total demand is 15 million tones). This may be manageable at the present juncture when the international prices are low and supplies plentiful, but would pose serious challenges in a different market situation. Indeed, there have been times when vegetable oil imports came next only to petroleum oil imports in terms of both volume and value. Greater self-reliance is imperative when demand is growing faster than the country’s population, and one essential step is to correct a support price policy that pegs prices too low.
The price band has been tried out in the past, under the Oilseeds Technology Mission soon after it was set up in 1986. The enforcement of such a price band through judiciously conceived policy prescriptions had helped double oilseed production by the early 1990s, reducing import dependence to barely 2 per cent. What could be done in the 1980s can be done again.
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