News Highlight
The government on Tuesday exempted customs duty and agriculture infrastructure development cess on 20 lakh metric tonnes yearly import of Edible Oil such as crude soybean and sunflower oil, to ease domestic prices.
Reason for the rise in domestic prices
- Edible oil prices have gone up significantly since Russia’s invasion of Ukraine affected the supply of sunflower oil from the Black Sea region
- Indonesia, in a surprise move, put a temporary ban on palm oil exports.
Significance of reducing custom duties and cess?
- India, the world’s biggest vegetable oil importer, tries to keep a lid on local prices.
- The exemption will help cool domestic prices and control inflation.
- “This will provide significant relief to the consumers
- The reduction in the duty, known as the Agriculture Infrastructure and Development Cess (AIDC), could bring down domestic prices and help consumers and domestic refiners cushion the blow from surging food costs.
Current Scenario of Edible oil in India
- Oil Seed Production
- Though, the oilseed production in India has grown by almost 43 per cent from 2015-16 to 2020-21.
- The oil production in India has however lagged behind its consumption, necessitating import of edible oils.
- Top 5 Oil Seeds Producing states:
- Rajasthan>Gujarat>Uttar Pradesh>Madhya Pradesh>Haryana
- Consumption Pattern
- Oilseeds and edible oils are two of the most sensitive essential commodities. India is one of the world’s largest producers of oilseeds and this sector is critical to the agricultural economy.
- Demand Supply mismatch
- The Ministry of Consumer Affairs admits the domestic consumption of edible oils is around 250 lakh tonnes, while the domestic production is only 111.6 lakh tonnes.
- The gap between demand and supply of edible oils is about 56 percent and is met through imports.
- Major Imports
- The Ministry of Agriculture data shows that India is the largest importer of vegetable oils in the world followed by China and USA.
- Of all the imported edible oils, the share of palm oil is about 60 per cent followed by soyabean oil with a share of 25 percent and sunflower at 12 per cent.
- Indonesia and Malaysia are major suppliers of palm oil to India and the country depends on Argentina, Brazil, and other countries including Ukraine and Russia for edible oils.
- The Russia-Ukraine conflict or any other conflict in the world has a direct impact on India’s edible oil prices
Constraints for increasing oilseed production are as following
- External price shock on account of dependence on import is a major challenge in this sector
- The cultivation of oil seed farms such as palm has long gestation period of about 3-7 years before the cultivators could actually begin to derive benefit from thereof.
- Oilseed crops are largely grown under rain-fed condition (>70%) and are more prone to biotic and a-biotic stresses. Only one fourth of oilseed producing area remains under the irrigation.
- High seed rate (number of seeds (Kg) to be used per hector or acre for maximum yield) and cost of seeds coupled with non-availability of quality seeds of varieties and hybrids.
Government Initiatives to Boost Domestic production
- National Food Security Mission (NFSM) – Oilseeds and Oil Palm to increase the production and productivity of oilseed crops and area expansion of oil palm in the country.
- National Edible Oil Mission-Oil Palm (NMEO-OP): for self-reliance in edible oil and involves investment of over Rs. 11,000 crore
- Oil Palm Area Expansion under Rastriya Krishi Vikas Yojana: Increasing the minimum support prices of oilseed crops, creation of buffer stock for oilseeds, cluster demonstration of oilseed crops, etc
- The Technology Mission on Oilseeds (1986):
- Helped India to increase the area under oilseeds from 9 million tons in 1986 to 32 million tons in 2018-19.
- This has been converted into a National Mission on Oilseeds and Oil Palm (NMOOP) in 2014.
- The components of NMOOP are incentive for seed, farm implements including efficient water application tools covered, etc.
Source – Economic Times