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Tuesday, June 15, 2021

Oil, on balance

Rising market prices of edible oils and pulses pinch households. They could also encourage a virtuous shift in cropping patterns.

By: Editorial |
Updated: June 2, 2021 7:56:58 am
India imports 13-15 million tonnes (mt) of edible oils annually, while domestic production is only 7.5-8.5 mt.

Lockdown-induced curbs on economic activity and being mostly confined indoors may have led many to look past the steep hikes in petrol and diesel prices — roughly Rs 4-4.5 per litre in the current month alone. The same, however, cannot be said about edible oils, whose consumption would have gone up with more food getting cooked in homes. The sharp price increase in these is noticeable and is biting consumers. Packed mustard, groundnut and sunflower oil are now retailing at an average of Rs 175-180 per kg, as against Rs 110-140 a year ago. All-India modal prices of even the mass-consumed vanaspati, palm and soyabean oil have risen from Rs 85-90 to Rs 140-150/kg in the last one year.

India imports 13-15 million tonnes (mt) of edible oils annually, while domestic production is only 7.5-8.5 mt. The prices that consumers, therefore, pay are largely linked to what it costs to import them. Landed prices of imported crude palm, soyabean and sunflower oil in India now, at around $1,200, $1,400 and $1,550 per tonne, respectively, are way higher than their corresponding May 2020 averages of $558, $672 and $789. The reasons for petrol, diesel and LPG cylinder prices going up in the recent period, apply equally to cooking oil. There is one fundamental difference, though: Unlike with petroleum, where only a handful of indigenous crude producers (as opposed to refiners) exist, India has several thousand oilseed growers. These farmers make money when edible oil prices harden in the international and domestic market. And they did this time: Groundnut, soyabean and mustard traded near or above their official minimum support prices during both the kharif and rabi marketing seasons.

Edible oils apart, prices of pulses — mainly chana (chickpea) and tur (pigeon-pea) — have also shown an uptrend, albeit far less compared to the former. The Narendra Modi government, it seems, is concerned. On May 15, imports of major pulses were moved from the “restricted” to “free” list. While that is welcome — regulating imports should always be through tariffs, not quantitative restrictions — a simultaneous move directing millers, traders and importers to disclose their stocks on a weekly basis isn’t. The government needs to take a balanced view: India produces too much rice, wheat and sugar, while being import-dependent on pulses and edible oils. Farmers should be encouraged to grow more of the latter, which also requires less water. When market prices are favouring this virtuous shift in cropping pattern, any administrative action sending out the opposite signals — ahead of the kharif planting season — is unwelcome.


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