Financial Daily from THE HINDU group of publications
Monday, May 20, 2002
Agri-Biz & Commodities
Oilseeds & Edible Oil
To increase oilseeds acreage: Solvent extractors seek sops for de-oiled cake exports
NEW DELHI, May 19
SOLVENT extractors have made out a case for subsidising export of de-oiled cake (DOC), as against the current recourse to frequent increases in the import duty on edible oils, as an additional route to promote oilseeds cultivation in the country.
"Farmers are reluctant to diversify from wheat and rice to oilseeds mainly because of the influx of cheap edible oil imports, which restrains domestic processors from paying remunerative prices for mustard or soyabean. The problem can be partly addressed if the Government considers providing a subsidy on DOC exported from the country,''Mr Pawan Kumar Gupta of the Delhi Vegetable Oil Traders Association (DVOTA) said.
Mr Gupta illustrated the example of mustard, where the oilseed is currently selling at Rs 1,400 per quintal in Delhi, while ruling at Rs 1,350-1,370 per quintal in Rajasthan. Even if one took into account the minimum support price (MSP) of Rs 1,300 per quintal and added to this, the various local levies and mandi expenses (3 per cent market fee, 1.5 per cent commission agent's fee, 2-4 per cent purchase tax, cost of gunny, etc), the effective procurement price comes to Rs 1,400 per quintal.
If, over and above this, the expenses on solvent, labour, electricity and other utilities are included, the total cost of procuring and processing one quintal of mustard-seed works out to about Rs 1,525 per quintal at the MSP and around Rs 1,600 per quintal at prevailing open market prices. On the other hand, at current market prices, the ex-factory realisation on expeller oil is around Rs 32,500 per tonne, while being Rs 3,600 per tonne for deoiled extractions.
Assuming one quintal (100 kg) of oilseed yields 40 kg of oil and 58 kg of DOC (the rest being losses during processing, etc), the gross realisation for the processor would be less than Rs 1,510, which does not even cover his cost of procuring and processing the mustardseed (Rs 1,525 at MSP).
"No wonder, open market prices never touch the MSP during peak harvest, when the farmer brings his crop to the mandis. Mustard prices go up beyond MSP level only when open market supplies dry up and stockists, who would have purchased the seeds at low prices during harvest time, manipulate these prices upwards,'' Mr Gupta observed.
According to him, the Government had so far only looked at the option of raising import duties on edible oils as a means of ensuring remunerative prices to the oilseed farmers. "It is time they start examining the viability of the other option, which is to provide a subsidy on export of DOC. This will increase the solvent extractor's net realisation on processing of oilseeds and, in turn, prompt him to pay more to the farmer,'' he pointed out.
Mr Gupta felt that the subsidy on DOC could be given directly to the processor as re-imbursement of internal transport cost to the port, which was compatible with the World Trade Organisation's (WTO) guidelines. "Given that we do not produce DOC from genetically modified soyabean or mustard, there is tremendous scope for further pushing oilmeal exports from the country,'' he added.
Through this route, the Government can also promote diversification of cropping pattern away from paddy and wheat to soyabean and mustard during kharif and rabi seasons, respectively. "The Government's expenditure on subsidy on DOC will be more than offset by the savings on the massive costs it is now incurring in the procurement and storage of excess foodgrains in its godowns,'' Mr Gupta said.
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