Benchmark price on anvil for palm oil, jatropha

The government has decided to come up with a formal indicative benchmark price for palm oil and jatropha, in order to curb the rising import bill on account of edible oil.

For this, the Commission for Agricultural Cost and Prices (CACP) has already initiated the exercise. “Even if we import for our domestic consumption, there has to be an idea of what is the approximate domestic price vis-a-vis import parity price.” CACP is already conducting a similar exercise for coconut oil.

Official sources explained that indicative benchmark will not serve as the minimum support price (MSP) as the government has decided not to take up under MSP any crop that obligates it to buy the crop if market prices slip below the MSP. But, since there is a subsidy burden on the government for edible oil under the public distribution system and there is a heavy import bill on account of edible oil, there needs to be a fair benchmark for the price.

Besides, they the sources added, since mostly raw oil was imported and then refined before being sold in the domestic market, a price benchmark would help ascertain if the import bill was overvalued or domestic selling price was above the cost, and how much it was contributing to overall food inflation.

Edible oil import bill is the third-highest for the government. And, for 2011-12, it is expected to hover around Rs 30,000 crore, next only to energy and urea import bills.

India is the fourth-largest edible oil consumer of the world and half of its total requirement is met through imports.

In 2010-11, the country's edible oil imports had fallen 6.2 per cent to 8.67 mt, from 9.24 mt the previous year, due to a higher domestic output and a rise in import cost on account of a weak rupee.

At present, the government adopts a market intervention scheme (MIS), an ad hoc formula that fixes the prices for horticultural and other agricultural commodities that are perishable in nature and are not covered under the MSP.

Besides, the Ministry of Agriculture has advised states and agriculture universities to develop hybrid varieties of pulses and edible oil. However, the government has made it clear that the hybrid varieties will have to be developed only from the existing domestic varieties and will not be genetically-modified ones.

"In that case, it will be suitable for domestic consumption," said an official source .

This forms part of the comprehensive exercise taken by the ministry to rework the domestic pricing formula, the import duty and MIS for palm oil and other oilseeds.

Even as palm oil production is currently done on a low scale, it has wider implications for the government’s efforts to build domestic edible oil capacities.

Explaining the move, ministry sources said it would be difficult to cater to the increasing oil consumption needs through imports alone, if oil exporting countries decide to divert a considerable production for biofuel production.

Jatropha, on the other hand, is a great source of biofuel. Currently, jatropha oil is used to produce biodiesel fuel in Philippines and Brazil, where it grows naturally, and in plantations in the Southeast, North, and Northeast of Brazil. Likewise, the oil is also being promoted as an easily grown biofuel crop in hundreds of projects across India. Large-scale jatropha plantations have been undertaken in India by many research institutions, and women's self help group.