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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

01/02/2005

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Mahamad Rodzi Abdul Ghani

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Caution on oilseed imports
20/1/05 INDIA - THE MINISTER FOR Agriculture and Food, Mr Sharad Pawar'sexplosive statement in Mumbai at the World Congress of InternationalAssociation of Seed Crushers that there was a need to encourage import ofhigh oil content oilseeds and genetically-modified seeds to overcome theshortage of raw material for the crushing and processing industry has sentthe entire industry into a tizzy. It is unclear what provoked thestatement. With a record rise in global oilseeds output this year,especially of soyabean in the US, suppliers are scouting for new marketsthat would support their farm-gate prices. The Minister has willy-nillysent out a signal that India is opening its doors to oilseeds and to thegenetically-modified (GM) varieties even.

Going back on the statement would be embarrassing given the internationalnature of the forum where it was made. But Mr Pawar must realise thatlowering the tariffs on oilseed imports could be damaging to the country'sfragile oilseeds economy. The context - Rabi oilseeds harvest is onlyweeks away - makes the situation worse. Forward prices at the commodityfutures exchanges are below the minimum support price of Rs 1,700 aquintal announced for rapeseed/mustard, while in the physical market theyare even lower at about Rs 1,500. The statement - made perhaps at theinstance of a section of the solvent extraction industry that has for longbeen demanding imports - can hurt oilseed farmers' interest as thehighly-subsidised cheap imports - OECD countries grant up to $7 billion insubsidy for oilseeds production each year - will directly and unfairlycompete with the indigenous output. There indeed is a chronic shortage ofoilseeds, which is filled through liberal imports, mainly of palm oil andsoyabeanoil. Palm oil is not produced in any significant quantity in the country.The economic and social costs of lowering tariffs on oilseed imports - ongrowers, and on indigenous crops - would be far greater than the benefitsof higher utilisation of processing capacity. Real is the risk of exoticpests and diseases entering the country and ravaging the already unstableoilseeds production. The industry needs to persuade itself to firm upbackward linkages to produce the raw material, but it has done preciouslittle. Contract farming has begun in cotton; the same can be replicatedin oilseeds too.

The Exim Policy allows oilseed imports under the open general licencesubject to strict phyto-sanitary inspections and specified Customs duty.Extreme caution is necessary in considering any cuts in the Customs dutyor dilution of the plant quarantine conditions. Several life-sciencescorporates and multinationals are working to crack open the Indian marketfor GM-oilseeds. Mr Pawar has encouraged them to intensify this lobbying.The experience of the last three seasons with GM-cotton has not exactlybeen hassle-free. It is clear that instead of taking the facile butpotentially risky option of imports, the policy-makers must apply theirmind to raising productivity and production of oilseeds. The way forwardis taking non-trade and non-price initiatives such as strengthening theinput delivery system, improving agronomic practices and effecting cropdiversification from surplus grains to deficit oilseeds.