Date: 16/02/2023

Relevance: GS-3: Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security.

Key Phrases: Self Reliance, Domestic Production, Domestic Shortages, Oilseeds, Import, Credit Period, PDS, Backward Integration, Climate Change.

Context:

• The government is eager to increase domestic production and minimise reliance on imports in order to alleviate the burden of 13-14 million tonnes of vegetable oil imports valued at over $14 billion required to fulfill chronic domestic shortages.

Key Highlights:

• In the medium to long run, the country must strive towards substantial self-sufficiency, but imports are unavoidable in the short term.
  • However, the current import policies prioritize the welfare of consumers and do not adequately safeguard the interests of local oilseed farmers.
• In order to achieve its objectives, a policy that adopts a comprehensive approach and takes into account the interests of both growers and consumers is essential.
• This is particularly important given the imminent challenges of land restrictions, water scarcity, and climate change, which require comprehensive policy interventions.

Initiatives That Can Help Boost Domestic Production:

• Boosting domestic oilseeds production is inevitable, for which effective policy measures are critical. Six initiatives that can help boost domestic production are:-
  1. Encourage crop rotation in high-input grain mono-cropping regions of Punjab, Haryana, and western Uttar Pradesh by offering incentives to expand the area under cultivation.
  2. Utilizing a range of technologies, including InfoTech, satellite tech, nuclear agritech, and nanotech.
  3. Focus on developing improved seed technology to make significant advances in production.
  4. Establishing a robust nationwide procurement system to support farmers.
  5. Capitalizing on the untapped potential of non-conventional oil sources such as cottonseed, rice-bran, and tree-borne oilseeds.
  6. Investing in improving the efficiency of crushing and extraction processes.
• Although each of these measures is achievable, their positive impact may not be immediately visible. Therefore, it is also necessary to identify some "quick wins" that can be implemented to deliver immediate benefits.

Policy Actions for ‘Quick Wins’:

1. Regulate and monitor imports of vegetable oil: At present, policy interventions tend to be impulsive and reactive, without the support of relevant data.
   • However, by implementing a straightforward administrative system for "Import Contract Registration" and closely monitoring imports, the lack of transparency in trade can be eliminated, and the Indian government can make informed, data-driven decisions.
2. Cut down credit period to overseas suppliers to 45 days maximum: A credit period of 90-120-150 days can promote excessive trading and speculation, leading to an "import debt trap" for some Indian importers. These importers are at risk of defaulting on bank loans, potentially causing them to become non-performing assets (NPA).
   • By reducing the credit period, the pace of imports will naturally slow, and importers will become more responsible and accountable, reducing the risk of default.
3. Bring cooking oil under PDS: To support vulnerable sections of the population, the government should supply edible oil at subsidized rates through welfare programs.
   • Both the Public Distribution System (PDS) and private trade channels can coexist and benefit consumers.
4. Allow oilseed import: To reap several benefits, the government can consider permitting the import of oilseeds as a partial substitute for vegetable oil imports.
   • This approach will increase the utilization of idle domestic processing capacity, enhance the availability of edible oil, and importantly, provide more cake/meal for the domestic livestock sector or for export.
5. Create an Oilseeds Processing Industry Modernisation Fund: Many of the 15,000 oilseed crushing units and 800 solvent extraction plants are intrinsically inefficient in terms of scale, equipment, technology and productivity.
   • A modernized industry will capture greater value and create potential to attract foreign direct investment.
6. Backward integration: Large processing units dependent on import must establish backward linkages to produce oilseeds by working with FPOs.

Conclusion:

• While the new oil palm initiative is a welcome step, it is crucial to conduct a comprehensive review of the promotion policy to ensure sustained growth.
• It is essential to have strong political will and to creatively disrupt the current status quo to bring about significant changes in the oilseeds sector.
• To achieve this, policymakers need to prioritize the oilseeds sector and provide policy, investment, and research support.
  • By doing so, the country can move towards substantial self-reliance and promote the interests of both growers and consumers alike.

Source: The Hindu BL

Mains Question:

Q. Raising the domestic production of oilseeds is vital to curb costly imports. Suggest measures that can be taken to increase domestic production. Comment (150 words).