Falling cooking oil prices ease subsidy burden

A declining trend in global prices of edible oils has taken the subsidy burden off the government, which has slashed the budget allocation on the same by 63 per cent for the next fiscal.

The subsidy has been reduced to Rs 200 crore for the 2009-10 fiscal from Rs 540 crore last year, even though the government has raised the level from Rs 15 per kg to Rs 25 a kg.

The allocated subsidy amount will be used to make available imported edible oil at cheaper rates to the common man through ration shops across the country.

Industry experts said that the subsidy burden on the government has been reduced as global prices of crude palm oil (CPO) and soyabean oil, the two major cooking oils in the import basket, have substantially come down since April 2008, when the import duty was abolished. Global prices of crude palm oil is currently ruling at $510 per tonne as against $1,150 per tonne in April 2008, while prices of crude degummed soyabean oil declined to $725 per tonne from $1,398 a tonne, according to the data maintained by the Solvent Extractors Association of India (SEA).

India annually consumes 120 lakh tonnes of edible oils, with imports contributing half of the number. In order to give relief to the common man from rising prices, the government had announced a scheme last year to supply edible oils through ration shops initially at subsidised rates of Rs 15 a kg to each family covered under below poverty line and Antyodaya Anna Yojana scheme of the public distribution system (PDS).

However, a Group of Ministers (GoM) headed by external affairs minister Pranab Mukherjee in January approved a proposal to raise the subsidy to Rs 25 a kg.

The subsidy was actually going to the PSUs, entrusted with the task of import, to offload the stocks to states at cheaper rates.