In quest for edible oil sufficiency

With US President Donald Trump ripping apart the rule-based international trading system, protectionist voices within the country, long suppressed, are finding utterance. In an article in Business Standard, agricultural economist and NITI Aayog member Ramesh Chand sees “the need to re-evaluate the policy of free import of edible oil, which has caused serious damage to India’s large oilseed economy, and, perhaps also consumer health.”

Chand’s lament is that with then PM Narasimha Rao and then Finance Minister Manmohan Singh opening up the economy in the early 1990s, “Pro-liberalisation sentiment started prevailing over the focus on self-reliance.” They fell for the advice of “some experts” that India was better off exporting competitively-produced wheat and rice and importing cheap Malaysian palm oil with the dollar earnings. This has led to the annual average import of 14 million tonnes of cooking oil ─ 66% of consumption. People are also consuming more oil because it is relatively cheap, and they are ruining their health by gorging on palm oil rather than less unhealthy but costlier oils.

“We should re-initiate the TMO to harness the potential of oilseed in the interests of producers and consumers,” Chand asserts. He is nostalgic about the Technology Mission on Oilseeds (TMO) which PM Rajiv Gandhi initiated in 1986. Faced with rising cooking oil imports ─ accounting for a third of the demand ─ and not enough dollar reserves to pay for them, Gandhi’s government raised import duties to 85%. The State Trading Corporation was made the sole importing agency. The National Dairy Development Board launched Operation Dhara. It was mandated to keep wholesale prices within a band of ₹2025/kg, through stocks and calibrated releases. Farmers in select districts were given subsidised seeds, credit and plant nutrients. Chand declares the mission successful. By 1992-93, oilseed production rose 78% from the 1986 level of 20 million tonnes, he says. Imports fell from two million tonnes to one lakh tonnes during this period.

Chand fails to mention that these gains could not be sustained. Imports soared with falling duties thereafter. The “experts” he cited ─ agricultural economist Ashok Gulati and his colleagues Anil Sharma and Deepali S. Kohli ─ wrote an analysis of TMO in Economic and Political Weekly in March 1996. They said a little over half of the increase in oilseed production under the mission was due to area diversion from wheat, millets and pulses. A third of the output increase came from yield improvement, mainly due to extension of oilseeds to irrigated areas. Yield enhancement was higher in groundnut than in soybean, mustard and sunflower.

While self-reliance in oilseeds may not be a goal worth chasing, since the price to the consumers will be too high, reliance on large-scale imports is also not desirable. Advocates of freer trade believe that food security comes from dollar reserves and not stuff in the godowns. The limits of this theory were tested in 2008, when countries exporting maize and palm oil diverted them for production of bio-fuels as crude oil prices spiked, causing a spurt in agri-commodity prices. Some countries could not buy grain because of the clampdown on exports. Bread riots ensued in countries like Egypt.

So India will have to incentivise oilseed producers by disallowing edible oil imports below the minimum support prices (MSP). Since August last year, the government has raised import duties four times. The tariff on crude palm oil has tripled to 48% and that on its refined version has more than doubled to nearly 60%. The duty on refined oils of soybean, sunflower, rapeseed (mustard) and cottonseed is 50%.

But the MSP as currently defined by the government ─ 50% mark-up on the sum of paid out expenses incurred on production plus the assumed value of family labour ─ could incentivise inefficient producers. Import duties must be dynamic and the domestic prices of edible oil should be set at a level that rewards the more efficient producers while not taxing consumers. A per-acre cash transfer to farmers that compensates them for the environmental services that oilseeds render ─ soil enrichment through nitrogen fixation and reduced ground water usage ─ would be less messy. (Telangana gives ₹4,000 per acre per season to all farmers regardless of size of land holdings). But land records would need to be updated and digitised, and tenancies would have to be legally recognised.

The profitability of oilseeds will not rise without enhanced productivity. Since the days of TMO, yields have risen. The average yield of soybean has increased from 755 kg/ha to 1,060 kg/ha. That of (kharif) groundnut ─ more a table nut now than an oilseed ─ has grown from 852 kg/ ha to 1,394 kg/ha. Rapeseed-mustard’s productivity has increased from 706 kg/ ha to 1,193 kg/ha. The Solvent Extractors’ Association (SEA) says salvation from import dependence lies in rapeseed and mustard. They have high acceptability in north and east India and also high oil content (37-42%). Soybean is grown on a bigger area but its oil content is lower at 17-20%.

SEA has launched Mission Mustard to get farmers in Punjab and Haryana to shift from (winter) wheat to mustard. Punjab Agricultural University says it has developed two varieties of rapeseed and mustard that have a yield of 1.8-2.2 tonnes/ha and are of olive oil quality. These are currently grown over 20,000 hectares in Punjab and can go up to 5 lakh ha. With better seeds and improved agronomy, mustard yields can rise, SEA says. It cites as example its two-year intervention in three districts of Gujarat, where its adopted castor seed (non-edible) farmers raised yield by 80% over business-as-usual farmers, by following prescribed farming practices.

The technique developed by a team of Delhi University scientists led by Deepak Pental is a tried, tested and safe one for creating mustard hybrids using genetic-modification (GM) technology. Unfortunately, Environment Minister Harsh Vardhan has stalled the release of their mustard hybrid, DMH-11, for cultivation since May last year despite the GEAC, the regulatory body comprising experts, recommending its release. Vardhan has allowed party ideology to trump the national interest by giving in to the Swadeshi Jagran Manch, which is opposed to GM crops. Vardhan has praised Congress leader Jairam Ramesh who blocked the release of GM or Bt Brinjal in 2010. From Rajiv Gandhi to Jairam Ramesh, admiration seems to be cutting across party lines!

(Vivian Fernandes has a blog site called www.smartindianagriculture.com)