If it was wheat that vexed policy makers in the last two years, 2008 saw edible oils wash away a large chunk of the government revenue, as a sharp rise in their prices forced the Centre to offer duty cuts and Rs 1,500-crore subsidy to supply imported oils through PDS.
The edible oils remained under the government scrutiny throughout 2008. While most part of the year was devoted to safeguarding interest of consumers by battling high inflation, the farmers and the industry also had their share of limelight towards the last few months, as prices fell sharply. The price of cooking oil — an essential kitchen item — started to rise in the domestic market from February onwards primarily due to skyrocketing prices in the global markets.
The price of soyoil had reached over Rs 80 a litre in March, while mustard oil soared to over Rs 100, thus upsetting the entire household budget.
The UPA government, which is in the last lap of its five-year term, swung into action to provide immediate relief to the consumers in distress. It took various administrative and financial measures in March to contain the rising prices. A ban was imposed on exports of edible oils and import duties were cut to improve the domestic availability.
With effect from April 1, the import duty on crude edible oil was abolished, while duties on refined oils were reduced significantly to 7.5 per cent.
As the country imports over 40 per cent of its total requirement, it was imperative on the part of the government to sacrifice its revenue for making available the imported oil at cheaper rates to consumers.
An official statement issued in July said that “the revenue of the government from import duty, which was about Rs 4,800 crore in 2006-07 and Rs 3,500 crore in 2007-08, will be very little this year”.
The cut in custom duties had an impact in augmenting supply as India imported a record 5.6 million tonnes of edible oils in 2007-08 season (November-October) to meet domestic demand, which is estimated to surge to nearly 13.3 million tonnes in 2008-09 from 11.8 million tonnes in 2005-06.
Besides duty reduction, states were empowered to impose stock limits on edible oils and oilseeds to check hoardings.
If that was not enough, the Centre decided to expand the ambit of public distribution system to include edible oils and provide relief to poorer sections of society.
In April, the Centre announced that it would distribute one kg of imported edible oil per ration card at a subsidy of Rs 15 a kg. Public-sector undertakings PEC, MMTC, STC and cooperative major Nafed were asked to import 1 million tonnes in the current financial year and supply it to the states in packed form at Rs 15 a kg less than the actual cost.
However, the very purpose of giving relief to the common man got defeated as it took more than three months to formally launch the scheme from Andhra Pradesh on July 28 and by that time the prices in the global markets had started to ease.
As a result, only 12 states implemented the scheme out of 29 states and Union Territories that were allocated edible oils under the scheme.
An official with a PSU said that due to procedural delay, the states did not get the oils in time. By the time the imported subsidised oils reached the states, the market price was either lower or at the same levels as private trade showed better efficiency in factoring the fall in global prices.
Now that the PSUs have huge stocks of edible oils with them, which were imported at a cost higher than the current rate, they are trying to offload in the local market instead of directly selling to the states, who refused to buy.
With palm oil prices plunging in Malaysia and Indonesia, India’s largest importing destinations, and arrival of the Kharif oilseeds in mandis, the price situation has improved from October, providing breather to the Centre. The crude palm oil price has declined to $400 a tonne from $1,400 a tonne in March.