By Prabhudatta Mishra
After crude petroleum and coal, edible oils are threatening to strain India’s current account, with imports of these items seen surging 65% on year to $17 billion in the 2020-21 ‘oil year’ (November-October) due to a spike in global prices. The government doesn’t appear to worry much though; it is striking it rich through high import taxes on edible oils by appropriating more than a third of the import value.
Import tariffs on edible oils range from 35% to 49.5% at present.
“There has been a decline in domestic demand for edible oils over the past couple of years due to high global prices and the lockdowns. But a big rise in global prices will likely push the import bill to Rs 1.26 lakh crore in the current oil year (November-Oct), against Rs 75,000 crore last year,” said BV Mehta, executive director of Mumbai-based Solvent Extractors’ Association of India (SEA). The government would garner around 45,000 crore from the import taxes on edible oils this year, Mehta added.
The total imports of all edible oils such as the palm group oils, soyabean oil and sunflower oils are estimated to be around 13.1 million tonne (mt) during 2020-21 oil year, almost at par with last year’s level (the import volume was higher at 14.91 mt in 2018-19 and was at an all-time high of 15.1 mt in 2016-17).
India’s significant import dependence for edible oils started in late 1990s; the imports were just 1.7 mt in 1996-97 and remained at around 5 mt until 2007-08. After that there has been a constant rise in imports, in sync with the rise in domestic demand from an emerging middle class.
Domestic production of oil seeds haven’t kept pace with the consumption demand; output fluctuated between 24 mt and 32 mt between 2005-06 and 2018-19. Production is estimated to be at an all-time high of 36.57 mt during 2020-21 crop year (July-June), according to the Union agriculture ministry.
India used to export edible oils before Independence, and was self-sufficient till the early 1970s. Imports started in 1970s and continued during 1980s until the country again became self-sufficient during 1991-94. However, after India signed WTO agreement in 1994, edible oil was put under open general licence even though with 65% duty and this led to the country importing 30% of its demand by 1998.
Mehta said SEA has suggested that the government kick start the much-delayed National Mission on Oilseeds with special focus on mustard, groundnut, soybean and oil palm. “We have suggested creation of buffer stocks which can be used to cool markets,” Mehta said.
The cost and freight (C&F) price of crude palm oil at Mumbai delivery increased by 59% to $1,000/tonne on June 18, against average $629/tonne during June 2020. The price was even higher at $1,305/tonne last month. Crude soybean oil, too jumped 54% to $1,125/tonne on June 18 from year-ago. Palm group of oils, imported from Malaysia and Indonesia, have a large share (~60%) in India’s total import of edible oils. Soybean oil is imported mainly from Argentina and Brazil while sunflower oil comes form Ukraine.
During the current kharif season, the Centre has set a target to bring an additional 6.37 lakh hectare area under oilseeds cultivation and rolled out a long-term plan to make the country self sufficient in edible oils. Last year, oilseeds were sown in 20.82 million hectare during the kharif season and 8 million hectare in the rabi (winter) season.