Edible oil exports: Regulating body, proper policy need of the hour
Taking foreign trade policy decisions with unfair delays has by now become a norm in New Delhi. After pulses, it is now the turn of edible oil exports.
As late as March 28, well after the growers have marketed a significant part of their last kharif season harvest of oilseeds, the Cabinet Committee on Economic Affairs decided to lift the prohibition on export of all varieties of edible oil including in bulk.
For reasons wholly unconvincing, the sole exception is mustard oil whose export will continue to be allowed only in consumer packs up to 5 kgs and with minimum export price of $900 a tonne. Major oils produced in the country include mustard oil, cottonseed oil, soyabean oil and groundnut oil.
It is strange that export of indigenous edible oil was restricted even when the country has been awash with edible oil, mostly imported. Imports augment supplies and keep prices under check. As much as liberal imports are necessary to support consumers, exports are critical to support domestic growers.
If the policy of liberal import is consumer-friendly, any restriction on export is in effect anti-farmer; and the country thoughtlessly clamped stringent restrictions on edible oil export for long years. A progressive foreign trade policy is one which keeps both export and import windows open; and from that perspective, India’s restrictive export policy in case of edible oils and pulses, has been regressive for long.
In the last one year, prices of oilseeds — mainly soyabean and groundnut — have been hovering at or below the specified minimum support price; and growers are the worst hit. To add insult to injury, there has been no procurement support worth the name.
It is under such challenging circumstances — mainly poor returns to growers — the government has been forced to open up exports. Oils that are likely to find demand in overseas markets, especially in countries with sizeable expatriate population, include coconut oil, sesame oil, groundnut oil and mustard oil. These oils are in demand for their characteristic flavour. The government’s admitted position is that production of oilseeds in 2016-17 has witnessed a quantum jump over the previous two years and that production in 2017-18 is likely to sustain at the same level.
In the event, there is no justification to restrict mustard oil export, despite the claim that it is an item of mass consumption in India. Indeed, it is a matter of shame that no indigenous oil, but imported palm oil which is really the item of mass consumption in India.
While it is necessary to do away with unnecessary restrictions, it is equally necessary to monitor/regulate export of edible oil through contract registration and tracking of export performance. The government will know well in the advance quantities likely to be exported, contracted prices, foreign exchange likely to be earned and period of shipment. This information will help policy-makers with some kind of forward guidance.
India has been out of the world edible oil market as an exporter for very long years. It will take time to cultivate markets and earn buyers’ trust. But potential buyers are sure to ask: What is the guarantee that exports will not be interrupted by the government?
The writer is a global agri-business and commodities market specialist. Views are personal.