‘High oil prices became a challenge in terms of managing consumer inflation’
Hyderabad: The domestic vegetable oil industry is pegged at Rs 2.5 lakh crore. The sector has seen huge volatility this year. High oil and oilseed prices, which normally would be a stimulus for increased production, became a challenge in terms of managing the consumer inflation, Indian Vegetable Oil Producers’ Association President Sudhakar Desai tells
Covid affected the incomes negatively. The soaring prices created a divergence between prices of essential commodities and consumer affordability. This is evident from the actions that various Governments are compelled to take to douse the price rally. Then came the edible oil inflation mainly due to the Ukraine crisis, export taxes and export ban by certain producing countries, labour shortage, drop in production. There were some supply chain disruptions too. The high prices reduced the demand for oil. As a result, edible oil import by India reduced by 2 million tonne compared to the normal 18 MT during the oil year.
Steps taken
The Indian Government took decisions including reduction in duties, stock controls, stoppage of domestic commodity exchanges, allowing import of refined oils, issuing tariff rate quota at zero duties. Government engaged in constant dialogue with the industry for price control measures. Prices have fallen steeply since then. In main edible oil producing countries like Indonesia, the problem quickly shifted from lack of supply to a desperate need to find a destination market for stocks of palm oil during June-October 22. Hence palm oil and consequently other oil prices dropped nearly 40-50 percent after the period of lifetime high prices seen during the year. Markets are in a consolidation phase. Currently, the palm oil prices are a discount of about 450 dollars per tonne compared to the new highs it has seen. This is a relief to the consumers especially the hotels, restaurants and caterers segment, which uses about over 70 percent oil palm oil.
Interactions
Efforts were to balance the industry challenges and consumer-driven Government concerns on prices. Industry ensured the supply chain did not get affected despite increases in freight rates, working capital needs, and price risks. The volatility of the market prices was many times higher than the margin in business. Industry explained these challenges to the Government to protect the interests of consumers, farmers, industry, treasury and the allied sectors.
Road ahead
IVPA suggested a duty policy wherein the Indian duties can be adjusted dynamically to the global price trends, while taking care of the MSP needs of the farmers and the MRP needs of the consumers. The huge dependency on edible oil imports puts India in a vulnerable position in terms of assured supply and edible oil security. India is the largest edible oil importer in the world. We believe the Government will soon come out with a national mission on the oilseed sector to provide impetus to the domestic cultivation of all oilseeds and drive import substitution.
