The Hindu Business Line : Caution on oilseed imports

THE MINISTER FOR Agriculture and Food, Mr Sharad Pawar's explosive statement in Mumbai at the World Congress of International Association of Seed Crushers that there was a need to encourage import of high oil content oilseeds and genetically-modified seeds to overcome the shortage of raw material for the crushing and processing industry has sent the entire industry into a tizzy. It is unclear what provoked the statement. With a record rise in global oilseeds output this year, especially of soyabean in the US, suppliers are scouting for new markets that would support their farm-gate prices. The Minister has willy-nilly sent out a signal that India is opening its doors to oilseeds and to the genetically-modified (GM) varieties even.

Going back on the statement would be embarrassing given the international nature of the forum where it was made. But Mr Pawar must realise that lowering the tariffs on oilseed imports could be damaging to the country's fragile oilseeds economy. The context — Rabi oilseeds harvest is only weeks away — makes the situation worse. Forward prices at the commodity futures exchanges are below the minimum support price of Rs 1,700 a quintal announced for rapeseed/mustard, while in the physical market they are even lower at about Rs 1,500. The statement — made perhaps at the instance of a section of the solvent extraction industry that has for long been demanding imports — can hurt oilseed farmers' interest as the highly-subsidised cheap imports — OECD countries grant up to $7 billion in subsidy for oilseeds production each year — will directly and unfairly compete with the indigenous output. There indeed is a chronic shortage of oilseeds, which is filled through liberal imports, mainly of palm oil and soyabean oil. Palm oil is not produced in any significant quantity in the country. The economic and social costs of lowering tariffs on oilseed imports — on growers, and on indigenous crops — would be far greater than the benefits of higher utilisation of processing capacity. Real is the risk of exotic pests and diseases entering the country and ravaging the already unstable oilseeds production. The industry needs to persuade itself to firm up backward linkages to produce the raw material, but it has done precious little. Contract farming has begun in cotton; the same can be replicated in oilseeds too.

The Exim Policy allows oilseed imports under the open general licence subject to strict phyto-sanitary inspections and specified Customs duty. Extreme caution is necessary in considering any cuts in the Customs duty or dilution of the plant quarantine conditions. Several life-sciences corporates and multinationals are working to crack open the Indian market for GM-oilseeds. Mr Pawar has encouraged them to intensify this lobbying. The experience of the last three seasons with GM-cotton has not exactly been hassle-free. It is clear that instead of taking the facile but potentially risky option of imports, the policy-makers must apply their mind to raising productivity and production of oilseeds. The way forward is taking non-trade and non-price initiatives such as strengthening the input delivery system, improving agronomic practices and effecting crop diversification from surplus grains to deficit oilseeds.

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