Palm oil import lobby raises spurious ‘Make in India’ bogey

  • 31-Jan-2019
  • Palm oil import lobby raises spurious ‘Make in India’ bogey

The palm oil import lobby has vehemently opposed the five-percentage-point duty reduction on imports from Malaysia. The government last month announced the duty reduction in deference to an old agreement with Malaysia signed in 2012 that envisaged such a duty reduction in 2019.

The lobby did little over the last seven years to brace itself for duty reduction by enhancing operational efficiency to build competitiveness. Now that the duty reduction is a fait accompli, it has begun to cry hoarse over development. As usual, it has started to use the oilseed growers to advance its own self-serving agenda.

To be sure, it is the responsibility of policymakers to safeguard the interests of oilseed growers. In fact, Indian edible oil importers have nothing to do with domestic oilseed growers. If anything, through excessive imports and rampant speculation, importers deny the Indian oilseed grower a remunerative price.

Far-fetched claim

A bogey raised is that duty reduction will defeat the objective of Make in India. There can be nothing more far-fetched or misleading than this claim. What importers do is import crude palm oil and process it into refined oil. That’s merely converting the raw oil to edible grade with little value addition as such. The expenditure on refining is a mere $40 per tonne (less than ?3,000 a tonne). It would be silly to qualify this for the Make in India label.

Fortunately, this time round, New Delhi has seen through the game and effected the duty reduction in terms of the sovereign agreement despite hectic lobbying. The real Make in India campaign would actually envisage cultivation of more oilseeds in India and converting them into oils domestically. That will help advance the interests of growers, processors and consumers.

But importers have a vested interest in continuing to conduct their import business uninterrupted. They have done hardly anything to help grow more oilseed domestically, nor have they attempted to provide the oilseed grower the minimum support price announced by the government from season to season.

Consumers set to benefit

With the duty reduction and narrowed differential between crude and refined oils (from Malaysia), there will be more import of refined oil, which will benefit consumers and reduce the speculative arbitrage available to the importer-refiner.

For delivering genuine price benefits to Indian oilseed growers, New Delhi must first begin to regulate vegetable oil imports. Unregulated annual import of a massive 14 million tonnes valued at about $11 Billion (?77,000 crore) means policymakers have no clue about the oil contracted for, the price, period of arrival and so on.

Often, large inventories of imported oil are built in the country and lobbying for a duty hike starts; and, more often than not, New Delhi has fallen prey and hiked duties which has brought windfall gains to importers, but little for domestic oilseed growers. This has been going on for years, and must stop.

The vegetable oil import trade needs close monitoring and regulation. The import credit period should be restricted to 30 days. Many importers are actually in an ‘import debt trap’ with high risk of bank funding turning into NPAs. The sooner New Delhi realises this, the better. Else, domestic growers will continue to languish.

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