Oilseeds and India

  • India accounts for 9.3 per cent of world oilseed production. It has the world’s fourth largest edible oil economy. Yet, about 43 per cent of edible oil available in India is imported. In 1999, India ranked as the world’s largest importer of edible oils, displacing China.
  • India has approximately 300 crude edible oil refining units, 60-70 per cent of which are small. Unlike the bigger refiners, the small ones are unable to import huge quantities of crude either due to their low capacity or lack of financial resources, and may be forced to close down or sell out to the bigger ones in the foreseeable future.
  • A major problem is the low capacity utilisation. The installed capacity of oil mills is around 36 million tonnes annually, but capacity utilisation is only 40 per cent. Solvent extraction plants show only 33 per cent capacity utilisation and vegetable oil refineries show 40 per cent.
  • The total import of edible oils during the period from November 1998 to October 1999 totalled 4.4 million tonnes valued at more than Rs. 9,000 crores. That was against a demand-supply gap of 1.4 million tonnes in 1998-99. Imports have therefore deluged the market.
  • The import of refined palm oil was put under OGL (open general licence) in March 1994. Other edible oils were put under OGL in April 1995. (When an item is brought under OGL, it means that the item can be imported without seeking any approval).
  • Originally, there was no discrimination between refined and non-refined edible oil as far as import duty was concerned. The duty on both was 65 per cent. Duty was then slashed to 30 per cent for both, then to 20 per cent in 1996 and 15 per cent in the 1999-2000 budget.
  • On December 30, 1999, a differential duty structure was introduced. Duty on refined oil was fixed at 27.5 per cent (25 per cent plus 10 per cent surcharge), while that on crude was retained at 16.5 per cent (15 per cent plus 10 per cent surcharge). But only actual users (as opposed to traders) are allowed to avail of this reduced duty on crude oil. Traders are nevertheless allowed to import crude at the reduced duty but only to sell to actual users on a high seas basis. This requires that the actual user fills in the import documents (and pays the reduced duty) but leaves the importing process to the trader.
  • In most parts of the world, import duty on oilseeds is lower than that on oils. But, in India, it is higher: 40 per cent. That is why no import of oilseeds or oil-bearing material has taken place in India. The industry wants the duty to be lowered from the present 40 per cent to 5 per cent.

Edible oils prices in the Indian market have crashed due to large imports by multuinational trading houses.
The edible oils industry is one sector in India that will see considerable reform in the foreseeable future.

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