In order to rein-in the rising prices of edible oils and augment availability especially during the upcoming festival season – August to October – the Government has lifted the restriction on import of refined palm oils and reduced the rate of customs duty.
It is estimated that already about 1,00,000 tons of refined oil has been contracted for import so far and more would be in the pipeline. Import of refined oils ready for human consumption is sure to cut down the avoidable lag time in import, refining and distribution. That’s the need of the hour.
If anything, traders too can participate in the import of refined oils. In recent years, traders have been marginalised as imports of vegetable oil are dominated by a handful of large refiners. Liberal import of refined oil will create a level playing field for all and reduce speculative arbitrage.
Encourage import of consumer packs
In fact, the Government must encourage import of refined palm oil and refined palmolein in consumer packs of say one litre pouch and 5 litre jerry cans. Packaged import will cut down the distribution time to the minimum so as to reach the consumers expeditiously. The State governments may consider distributing the packaged oil through welfare programs.
This policy recommendation is only for a short duration of a few months so as to augment availability quickly and advance consumer interest.
The refiners lobby has already protested against the government policy to liberalise the import of refined palm oil. They have expressed apprehension that inflow of more refined oil into the country from neighbouring Nepal and Bangladesh will hurt them. This fear is highly exaggerated.
Regulate imports
At the same time, Indian importers have demanded that such imports be regulated; and this demand is justified. It would be prudent to have a policy of contract registration and monitoring of actual import. The system would provide the policymakers with authentic data relating to quantity of import contracted for, type of oil, period of arrival and so on. This data would allow New Delhi to take informed decisions and any intervention would be largely data driven.
By the same logic, not just refined oils but import of all vegetable oils must be monitored and regulated through a system of contract registration with a designated government authority. The sooner the system is introduced the better for the Union Ministry of Food for taking timely decision and make rational intervention.
On the same lines as pulses, the Government may ask the edible oil industry to declare the stocks of raw material and finished products under the Essential Commodities Act. Such a move would reduce if not eliminate speculative inventory building, if any, by entities.
The southwest monsoon has unfortunately stalled over the last two weeks. This can potentially impact oilseed planting and eventual Kharif harvest in September / October. New Delhi would be well advised to remain vigilant even while ensuring that consumers interest is not compromised.
(The author is a policy commentator and agribusiness specialist. Views are personal)