Centre’s pro-farmer turn in edible oils

Sub: Geo

Sec: Eco Geo

India’s Edible Oil Policy Changes and Market Trends

Increased Import Duties (September 13, 2023):
- Basic customs duty (BCD) on crude palm, soybean, and sunflower oil: 0% to 20%
- BCD on refined oils:5% to 32.5%
- Effective import duty on crude oils:5% to 27.5% (after adding a 5% ‘agriculture infrastructure and development cess’ and a 10% ‘social welfare’ surcharge on the BCD with the cess).
- Effective import duty on refined oils:75% to 35.75%
Approval for State Procurement:
- Maharashtra, Madhya Pradesh, Karnataka, and Telangana allowed to procure soybeans at the minimum support price (MSP) of ₹4,892 per quintal.

Global food inflation:

The United Nations’ Food and Agriculture Organization’s vegetable oils price index (base value: 2014-16=100) rose from 98.7 points in August 2020 to a peak of 251.8 points in March 2022, post Russia’s invasion of Ukraine.
Global prices have eased since, with the index reading at 136 points for August 2024.

Impact on Domestic Market:

Wholesale prices in key markets like Dewas and Latur recovered from ₹4,200-4,300 to ₹4,600-4,700 per quintal

Reasons for Policy Shift

Economic Considerations:
- Increased oilseed planting area (193.32 lakh hectares in 2023)
- Benign global prices
- Negative inflation for edible oils (-0.86% in August)
Political Motivations:
- Upcoming Maharashtra Assembly polls
- Maharashtra is India’s second-largest soybean producer

Import Trends:

2022-23: Record 16.5 million tonnes (mt) of edible oil imports
2023-24 (first 10 months): 13.5 mt (3.6% lower than previous year)
Sunflower oil imports surged to 3.1 mt, becoming the second-largest imported oil, leaving behind soybean.
- Mainly imported from:Russia (1.5 mt), Romania (0.6 mt), Ukraine (0.5 mt) and Argentina (0.4 mt).
- Imports of soyabean oil are primarily from Argentina and Brazil, while palm is from Indonesia and Malaysia.

Oilseeds: Domestic Production vs. Imports

2022-23 Imports: 16.5 mt
Domestic Production: 10.3 mt
- Mustard/rapeseed: 4 mt
- Soybean: 1.9 mt
- Cottonseed: 1.2 mt
- Rice bran: 1.1 mt
- Groundnut: 1 mt

FAO Food Price Index (FFPI):

The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities.
It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016.
Under this, the following indices are released:
- FAO Cereal Price Index
- FAO Vegetable Oil Price Index
- FAO Dairy Price Index
- FAO Meat Price Index
- FAO Sugar Price Index

Source: IE