Mumbai: One could see it coming. One more commodity has fallen victim to policy risk. After the ban on export of wheat and pulses, it is edible oil now added to the list of prohibited items. It is obvious, the Government is getting increasingly desperate, as success in checking inflation has proved to be rather elusive.
Prices of various essential food products including of course edible oil have seen a sharp rise in recent months in the domestic market. Higher domestic oilseed output could not dampen the sentiment. International prices too have been strong.
Reduction in Customs duty has not been of much avail. Going by experience, prohibition on export is, of course, a logical step to be expected of the Government that has no embarrassment in reversing liberal trade policies. However, not much is likely to be achieved in terms of reining in prices.
After all, exports constitute a very small fraction of the country’s total production and consumption. According to market reports, about 40,000 tonnes of various oils have been exported. This includes around 25,000 tonnes of groundnut oil at prices in the $1,800-1,900 a tonne range.
Some quantity of soyabean oil has also reportedly been contracted for export. India traditionally exports small volumes of premium oils of coconut, sesame and mustard, mainly to cater to expat population. Yet, exports did exert a sentimental impact on open market prices.
Importantly, much of the value in the chain was captured by export houses, rather than primary producers. So, no one needs to shed any tears on this export ban. The unfortunate part is that even exporters of premium edible oils in consumer packs will be affected.
If New Delhi harbours any hope that prohibiting export will result in a fall in prices, it could be mistaken. This kind of piecemeal strategy is most unlikely to deliver results. High open market prices are hurting poor consumers.
Through its continued inaction and/or weak action on the price front, the Government has compromised the interests of the poor people. Perhaps, the most effective way to genuinely support poor consumers is to restart supply of edible oil through the public distribution system. Why the Centre has neglected the most rational approach to advance consumer interest remains a mystery. Why only rice and wheat through the PDS; why not edible oil?
New Delhi can no more distance itself from its responsibility. What are the other options available to the Government? There could be imposition of storage limits on oilseeds and oils. Customs duty on imported oils could be reduced further and even reduced to zero for a period of time.
Delisting of edible oil from the bourses is also an option. It is a shame, the country is going back to the dark ages of controls and restrictions. Reversal of liberal trade policies is a clear reflection of the government’s failure on the agricultural production front.
Prices of various essential food products including of course edible oil have seen a sharp rise in recent months in the domestic market. Higher domestic oilseed output could not dampen the sentiment. International prices too have been strong.
Reduction in Customs duty has not been of much avail. Going by experience, prohibition on export is, of course, a logical step to be expected of the Government that has no embarrassment in reversing liberal trade policies. However, not much is likely to be achieved in terms of reining in prices.
After all, exports constitute a very small fraction of the country’s total production and consumption. According to market reports, about 40,000 tonnes of various oils have been exported. This includes around 25,000 tonnes of groundnut oil at prices in the $1,800-1,900 a tonne range.
Some quantity of soyabean oil has also reportedly been contracted for export. India traditionally exports small volumes of premium oils of coconut, sesame and mustard, mainly to cater to expat population. Yet, exports did exert a sentimental impact on open market prices.
Importantly, much of the value in the chain was captured by export houses, rather than primary producers. So, no one needs to shed any tears on this export ban. The unfortunate part is that even exporters of premium edible oils in consumer packs will be affected.
If New Delhi harbours any hope that prohibiting export will result in a fall in prices, it could be mistaken. This kind of piecemeal strategy is most unlikely to deliver results. High open market prices are hurting poor consumers.
Through its continued inaction and/or weak action on the price front, the Government has compromised the interests of the poor people. Perhaps, the most effective way to genuinely support poor consumers is to restart supply of edible oil through the public distribution system. Why the Centre has neglected the most rational approach to advance consumer interest remains a mystery. Why only rice and wheat through the PDS; why not edible oil?
New Delhi can no more distance itself from its responsibility. What are the other options available to the Government? There could be imposition of storage limits on oilseeds and oils. Customs duty on imported oils could be reduced further and even reduced to zero for a period of time.
Delisting of edible oil from the bourses is also an option. It is a shame, the country is going back to the dark ages of controls and restrictions. Reversal of liberal trade policies is a clear reflection of the government’s failure on the agricultural production front.
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