Not only is the production target of 262 lakh tonnes (lt) oilseeds for 2004-05 unlikely to be achieved, the supply gap is sure to widen, worsening the import dependence of the country. During financial year 2003-04, despite a near-record output of 250 lt oilseeds, vegetable oil imports were unrelenting at a high 51 lt. In the current fiscal, will imports reach another new high?

Considering the damage already suffered by planted kharif oilseeds such as groundnut and soyabean, and assuming normal weather from now on till the rabi season harvest next March, oilseeds production can potentially be lower by 22-26 lt, and if weather continues to be unfriendly, the decline could only be higher.

This loss translates to roughly 10 lt in terms of vegetable oil, depending on the composition oilseeds in the production basket. Another factor that would come into play is the level of international prices. Last year, world vegetable oil prices ruled rather firm, especially since October 2003 when damage to the US soyabean crop became apparent. On the back of high soya oil prices, the palm oil complex too was firm.

On the other hand, last year, oilseed growers here enjoyed the double benefit of high domestic production and high international prices. Groundnut and soyabean growers never had it so good. India exported one lakh tonnes of groundnut oil and over two lakh tonnes of groundnut kernels and sesame seeds.

But the situation emerging now is different. World oilseed output is poised to register a new record of 379 mt, while world palm oil production is set reach close to 30 mt. As a result, international market has already begun to soften.

Forward prices are much lower than at present. Lower world prices are sure to encourage larger inflow of vegetable oils in to the country, already burdened with the prospect of lower indigenous production.

The Centre will have to undertake a serious review of the vegetable oil sector. Consumer interest will have to be protected by ensuring uninterrupted supplies of cooking oils.

At the same time, growers have to be assured of remunerative prices, although the rates they received last season are unlikely to be repeated.

The Government will have to do a fine balancing act. On its part, the industry and trade will lobby for a whole lot of concessions. Without succumbing to sectoral pressures, policymakers in New Delhi must take a holistic view of the present and emerging situation.

As part of the exercise, rates of customs duty, quality issues, prices and other related issues would have to be looked into.

The present context provides yet another opportunity to examine the effectiveness of various production programmes including efficacious deployment of funds.

Source: Business Line, July 29' 2004