Costlier edible oils
29/05/2021

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Context:

  • According to the data by the Department of Consumer Affairs, the prices of six edible oils — groundnut oil, mustard oil, vanaspati, soya oil, sunflower oil, and palm oil — have risen between 20% and 56% at all-India levels in the last one year.
  • In fact, the monthly average retail prices of all six edible oils soared to an 11-year high in May 2021. The sharp increase in cooking oil prices has come at a time when household incomes have been hit due to COVID-19. 

Consumption of edible oils:

  • With rising incomes and changing food habits, consumption of edible oils has been rising over the years. While mustard oil is consumed mostly in rural areas, the share of refined oils —sunflower oil and soyabean oil — is higher in urban areas.
  • A steady rise in the per capita availability of vegetable oils, through domestic sources as well as imports, indicates that demand has continued to rise.
  • According to the Ministry of Agriculture and Farmers’ Welfare, the per capita availability of vegetable oils in the country has been in the range of 19.10 kg to 19.80 kg per annum during the last five years.

How much is produced domestically and how much is imported?

  • In 2019-20, domestic availability of edible oils from both primary sources (oilseeds like mustard, groundnut etc.) and secondary sources (such as coconut, oil palm, rice bran oil, cotton seed) was only 10.65 million tonnes against the total domestic demand of 24 million tonnes — a gap of over 13 million tonnes.
  • Thus, India depends on imports to meet its demand. In 2019-20, the country imported about 13.35 million tonnes of edible oils worth Rs 61,559 crore, or about 56% of the demand.
  • This mainly comprised palm, soyabeanand sunflower. The major sources of these imports are Argentina and Brazil for soyabean oil; Indonesia and Malaysia palm oil; and Ukraine and Argentina again for sunflower oil.

Why are prices rising?

  • The increase in domestic prices is basically a reflection of international prices because India meets 56% of its domestic demand through imports.
  • In the international market, prices of edible oils have jumped sharply in recent months due to various factors.
  • One of the reasons behind this rising price is the thrust on making biofuel from vegetable oil.
  • There is a shifting of edible oils from food basket to fuel basket, there has been a thrust on making renewable fuel from soyabean oil in the US, Brazil, and other countries.
  • He said that despite the Covid-19, the global demand for edible oils has been high.
  • Other factors include buying by China, labour issues in Malaysia, the impact of La Niña on palm and soya producing areas, and export duties on crude palm oil in Indonesia and Malaysia.

What are the options before the government?

  • One of the short-term options for reducing edible oil prices is to lower import duties.
  • The policy for import of crude palm oil is “free”, while for RBD palm oil it is “restricted.” If the government reduces import duty on refined palm oil, prices will come down immediately.

 

  • However, the edible oil industry is not in favour of reducing duties. If import duties are reduced, international prices will go up, and neither will the government get revenue, nor will the consumer benefit.
  • Government can alsosubsidise edible oils and make available these to the poor under the Public Distribution System.
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