Dire Need To Tap Veg Oil Resources

The solvent extraction industry is playing an important role in the country's vegetable oil economy and it has the potential of making much bigger contribution to the availability of vegetable oils, particularly from non-conventional sources, thereby minimising the need for imports of vegetable oils-edible as well as non-edible.

The low recovery of non-conventional vegetable oils is mainly due to various constraints faced by the industry and inadequate fiscal incentives to exploit the available resources. The following action should be taken to exploit the situation:

Excessive import of edible oil are causing severe injury to the domestic oilseeds and vegetable oil industry and if unchecked over a period would have serious long term impact on oilseeds production and adversely affect the viability of the processing industry. This has a cascading effect on the domestic price of vegetable oil. The current vegetable oil price is lower than the price even prevailing during 1991.

 

Regulate import of vegetable oils through variable custom tariff or through other mechanisms depending on local demand, supply and price situation. Import of crude edible oil should be preferred over refined vegetable oils by imposing higher import duty on refined oil than on crude edible oil to encourage domestic refining industry (e.g.crude edible oil @ 30% & refined edible oil @ 40%).

Restrict the imports of industrial (soap) oils :The vegetable oil economy of the country has been adversely affected on account of the de-canalisation of import of fatty acids, acid oils, crude palm stearin and soap stock in August '91 and progressive reduction of import duty from 150% to 30% in the last union budget and has encouraged larger import of soap oil and it is estimated that about 2.0 lakh tonnes was imported during 1996-97 oil year. This has seriously affected the working of the solvent extraction units producing non edible rice bran oil and minor oils as the processing has become unremunerative due to cheaper markets of industrial oils. This in turn has affected the exports of oilmeals from rice bran and minor oilseeds of tree and forest origin.

Import of oilseeds/oil bearing material both crushing and refining industries are facing severe shortage of raw material for processing and operating at 30/35% capacity only and more than 50% plants are closed or on the verge of closure. The finished products of the industry i.e. vegetable oil is freely importable but its raw material i.e. oilseeds and oil bearing materials are not freely importable and deprived of level playing field. There is gross capacity under utilisation in the processing industry.

Also, to overcome the quarantine issue if any and check that the seeds are not used for sowing purpose, imports of oilseeds could be permitted under actual user condition' and also VOP directorate, ministry of food & consumer affairs may be entrusted to ensure its compliance as solvent extraction and crushing units are regulated under VOP Control Orders. This will ensure the total compliance. Also, we may add, during 1977 to 1979, country had imported rapeseed in large quantity and never faced any quarantine problem.

Self sufficiency in oilseeds production - long term solution:

Prices of indigenous edible oils have remained depressed and are even lower than the prices prevailing in 1991.

The industry is working on very low margins and at extremely low capacity utilisation its viability is continuously getting eroded. The long term implications of rising imports to meet the widening gap between demand and supply on oilseeds production and our goal of self-sufficiency must be seriously evaluated. Going by past experience it must be acknowledged that a good deal of success of technology mission on oilseeds was due to the prices in the wake of the mission's strategy.

Abolition of agricultural cess on oilseeds & oilcakes/meals:

Agriculture cess under Agricultural Produce Cess Act 1940, @ 0.5% on tariff value is being collected on export of oilseeds and oilcakes/meals should be abolished as this actually adds to the cost and makes Indian produce uncompetitive in the international market. In the case of HPS groundnuts, exporters have to pay an additional cess of 0.5% advalorem over and above 0.5% cess on prescribed tariff value which is applicable to all other oilseeds. In the case of mustardseed export cess is 2% which should be removed till such time mustardseed(whose export is at present negligible) attains a permanent foothold in the international market.

Multiple laws: While pace and scale of reforms in the economy is to be speeded up our sector has had a by pass and reforms have barely touched us. As an illustration, we have been urging the government to allow blending of edible oils similar to vanaspati so as to encourage the usage of non traditional oils like rice bran, cottonseed and minor oils of tree and foreign origin as a direct cooking medium.