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In step with an economy becoming richer, setting off changes in lifestyle and diet patterns, the use of edible oils per head rises. The advance estimate of national income by the Central Statistics Office for 2012-13 puts per capita income at Rs 68,747, a rise of 11.7 per cent over the previous year. Along with this progress, per capita availability of edible oils rose to 14.5 kg in 2010-11 from 5.8 kg in 1992-93. However, there is not much room for celebration over this.
The Economic Survey 2012-13 points out that progress in per capita availability is more on account of rising import of oils than local production growth of oilseeds, from 18.4 million tonnes (mt) in 2000-01 to 29.80 mt in 2011-12. No matter that India figures prominently among the world's leading producers of oilseeds, thanks largely to the area under the crops. For half its oil requirements, it remains import dependent.
For Finance Minister P Chidambaram, the current account deficit (CAD) is a "greater worry" than the fiscal deficit, which hopefully will be capped at 4.8 per cent. Though Chidambaram has not made a reference to growing volumes of edible oil imports as a source of CAD concern, their arrival in such large quantities is causing a big outgo of foreign exchange. The Survey makes the point that large imports are "primarily due to competitive prices of edible oils in the international market and the import duty structure... to protect consumers". The country raised its vegetable oil imports in 2011-12 (November to October) hugely to 9.982 mt from 8.372 mt the year before.
What is of nagging concern is the rising import intensity in the current oil year. In the first quarter of 2012-13 oil year (November to January), imports were up 27 per cent to 2.77 mt year-on-year. The president of the Solvent Extractors' Association (SEA), Vijay Data, says the cause of elevated levels of self-sufficiency will be served if the government would charge customs duty of 10 per cent on crude palm oil and 20 per cent on refined varieties. Imports of refined palm oil get incentivised if it does not invite a 7.5 to 10 per cent higher customs levy vis-a-vis crude oil. No doubt, reducing the duty difference to five per cent led to a record import of 153,000 tonnes of refined palm oil in January. A large percentage of the local refinery capacity is staying idle. Big quantity imports of refined oil are adding to the woes of the refinery sector.
Dorab Mistry, Godrej International director and a keen watcher of the global oils scene, had earlier forecast that India would, in two stages, raise the import duty on unrefined palm oil to 20 per cent and on the refined kind to 27.5 per cent. In making the forecast, Mistry might have taken hints from the Economic Survey saying "one instrument for promoting future domestic production is calibration of the import duty structure... it is time to frame a price band for edible oils in a manner that harmonises the interests of domestic farmers, processors and consumers through imposition of import duty at an appropriate rate".
The Survey makes a novel suggestion, that the proceeds from import duty on oils could be utilised for an oilseeds development programme. India is advantageously placed, compared with most other growing countries, in that its different agro-climatic zones support growing of seven major and other oilseeds, including some 'high value premium crops'. At the same time, the Indian oilseed productivity, compared to the world average, ranges from 42 per cent for soybeans to 66 per cent for groundnut. In fact, at about 1,000 kg yield a hectare, Indian productivity is less than one-third of the best found in the world.
According to expert Govindbhai G Patel, the main culprit for low productivity is farmers' overdependence on monsoon rains, available at the most for four months in a year but often erratically. The phenomenon has left farmers no alternative to growing early maturing varieties. If the yield is less for the summer harvest, with a short maturity time, the winter crops bear the brunt of poor supply of irrigation water. Incidentally, less than 25 per cent land under oilseeds falls within the command area of irrigation. The other devil is small land holdings, the average farm size being 1.55 hectares. In the Budget for 2011-12, the government provided a measly Rs 300 crore for expansion of palm oil-bearing trees.
The government will do well to listen to the suggestion of SEA that a yearly allocation of Rs 2,500 crore for three years be made for making a noticeable impact on oilseeds productivity. The oilseeds extension programme is primarily a government responsibility, specially expansion of irrigation coverage and funding of oilseeds research. But the task being so big, it is incumbent on solvent extractors and refiners to also participate in the extension programme, by making available inputs to farmers and educating them about best practices. It is only natural that companies participating in the programme will be seeking incentives by way of 'weighted income tax deduction' on their investments. They want the deduction at 200 per cent, which, however, leaves scope for scaling down.
