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Informist, Tuesday, Jan. 7, 2025

 

By Shreya Shetty, Afra Abubacker, and J. Navya Sruthi

 

MUMBAI/NEW DELHI – India should have a policy that protects the interests of domestic oilseed growers amid rising edible oil imports, according to G. Chandrashekhar, a commodity expert and policy commentator. Along with regulating cooking oil imports, India needs to substitute a part of edible oil imports with oilseeds, Chandrashekhar told Informist in an interview. 

 

Importing oilseeds will generate employment and utilise idle capacity in the solvent extraction industry. "We import 3.0-3.5 million tonnes of soybean oil annually, which is equivalent to 20 million tonnes of soybeans. Why not import 5-6 million tonnes of soybeans, which will give 1 million tonnes of oil, and close to 5 million tonnes of soybean meal?", Chandrashekhar said.

 

However, unregulated oilseed imports may dampen domestic oilseed prices. "If the (landed cost of soybean seed) import is lower than the minimum support price, impose a tariff and equalise it with the minimum support price. Therefore, it will not depress domestic production." Along with trade regulations, Chandrashekhar said, India needs scientific solutions to catch up on oilseed productivity.

 

On ethanol feedstock, Chandrashekhar said there was nothing like an ideal stock and whichever commodity that is in 'genuine surplus' can become a feedstock. "Actually speaking, there was a compulsion to divert cane for ethanol purposes. A compulsion was projected as a virtue." There was a compulsion to divert excess sugarcane to ethanol to support sugar mills and cane farmers, he said. The government launched the National Policy on Biofuels in 2018, under which the ethanol programme was promoted to reduce crude oil imports and carbon emissions.

 

The following are edited excerpts from the interview:

 

Q. What can the agriculture sector expect from the Union Budget FY26?
A. I would definitely like to see a higher allocation of funds for research and development programmes for key crops. Agriculture needs to be climate smart with climate change, land constraints, and water shortage. We want funds, but we also want outcomes that are measurable. 

The government may be tracking prices on a day-to-day basis, but that's history. Now, it needs to have a global and domestic market price outlook, say over the next two months. They should set up a commodity intelligence desk. Once you capture emerging signals from the global market and from the Indian market, you can make policies proactively.

 

Also, the agriculture input market--seeds, fertilisers, agrochemicals--has to be regulated, not controlled. A lot of substandard products are being supplied. I'm quite bullish on farmer-producer organisations, but we need to build capacity amongst them. I would like to see a policy that links them with agriculture universities and Krishi Vidyan Kendra.

Q. What policy intervention do we need to protect domestic oilseed growers?

A. I have provided a policy paper with at least half a dozen suggestions. Firstly, India needs to monitor and regulate edible oil imports. If the government has data on the contracted quantity, its origin, price and when it will be imported, then it can take proactive steps. For decades, we have talked about the huge potential of non-conventional oil sources like tree-borne oil, but we have hardly tapped the potential. I think we need a national policy to promote tree-borne oilseeds. 

 

I would like to see a part of edible oil imports be replaced by oil seeds. Take soybeans, for example. We import 3.0-3.5 million tonnes of soybean oil annually, which is equivalent to 20 million tonnes of soybeans. Why not import 5-6 million tonnes of soybeans, which will give 1 million tonnes of oil, and close to 5 million tonnes of soybean meal?

 

Importing oilseeds will generate employment and utilise idle capacity in the solvent extraction industry. It will give you the much-needed oil and feed, which is required for our livestock industry.

 

Also, the government must have the will to tell large importers that they have a moral responsibility to produce or contribute to domestic production. This is called establishing backward linkages. We need technological breakthroughs in seed and input management. Our soybean productivity is stuck at 1 tonne per hectare, while the US, Argentina, and Brazil produce more than 3 tonnes a hectare.

 

Q. You have suggested partially replacing oil imports with oil seed imports. How would that affect soybean seed prices?
A. Imports should attract a level of tariff that will ensure that the landed cost of the imported material is equal to the minimum support prices that the government has decided. If the import is lower than the minimum support price, impose a tariff and equalise it with the minimum support price. Therefore, it will not depress domestic production.

 

Q. The government is supplying breeder seeds for increasing oilseed cultivation as part of its Oilseed Mission. What is your take on breeder seeds, and what are the challenges in increasing oilseed cultivation?

A. Breeder seeds ensure 100% genetic purity, which is very important. But distribution of breeder seeds by itself is not going to solve the problem of oilseed shortage. There are multiple factors that affect India's agriculture. We have ignored these challenges for many years, and we have taken the easy route of importing edible oils to meet the needs of the consumers. Therefore, when challenges such as marginal land, the lack of irrigation, dependence on monsoon, seeds with very low vigour, etc. occur, they result in low yields. India has had a low yield for at least 25-30 years. Now we need to rethink our oilseed sector policies.

 

Q. Does the recent exit of Adani Enterprises Ltd. from Adani Wilmar have any impact on the market dynamics in the long and medium term?
A. Nothing at all. It's a corporate arrangement. It is not going to affect India's demand and supply fundamentals or prices. It may affect some company's share price. That is another matter. 

 

Q. Do you think the government will tighten import duty on various pulses in the upcoming Union Budget to support domestic production?

A. When you look at the pulses production data of the government, in the last three years, our pulses production has actually been declining. I think 2021-22 was 27.3 million tonnes, in 2022-23 it was 26.1 million tonnes, and in 2023-24 it was 24.2 million tonnes. This shortage is made up by imports. 

 

Therefore, import is inevitable. Again, like oilseeds, pulses imports are also unregulated. This also calls for close monitoring and regulation of imports. At the moment, I don't see that happening.

 

Q. How do you view wheat supply in the market? Is there any chance the government will cut duty on wheat imports?

A. I strongly feel the wheat market fundamentals are tightening. We have lower production, definitely far lower than what the government numbers suggest. Lower production, lower procurement, high prices, and falling public stocks - this is a dangerous combination.

 

We have somehow managed to tide over the situation without importing in the last two years, as New Delhi is reluctant to permit imports. But remember, while the government might assume that it has managed the situation without having to import, consumers have paid a high price. 

 

I think we should adopt one of the three proposals – imports on a government-to-government basis or a reduction of 40% duty to allow private trade to import or to buy a call option on the Chicago Board of Trade for two to three million tonnes – to import wheat. This is to help contain wheat prices and augment wheat supplies within our country. 

 

Q. The government has been pushing for maize as the go-to stock for ethanol production for more than a year. What should be the ideal feedstock for ethanol production if there is one?

A. There is nothing like an ideal feedstock as far as any country is concerned. Whatever (feedstock) is in surplus should be converted into ethanol. But the bigger question is food versus fuel. The US converts a lot of corn into ethanol. The US converts corn to ethanol and Brazil converts cane into ethanol. They are surplus countries and can afford to convert food into fuel. 

 

We (India) are not in that league. We are a shortage economy and just because cane production increased for four years in succession until two years ago, until 2022, there was a huge surplus of sugar in our country.

 

The government had to subsidise sugar exports as mills had kept big cane arrears to be paid to farmers. To address all these challenges, the government said let us divert a part of the cane for ethanol. That's the background.

 

Actually speaking, there was a compulsion to divert cane for ethanol purposes. A compulsion was projected as a virtue. It was a compulsion, but it was projected as a virtue that we are boosting renewables or biofuels etc. The same situation for maize. Maize fundamentals are absolutely tight and therefore there's a demand now for maize imports. Will we import maize? Big question.

 

Q. India has become a net importer of ethanol as well as maize. Are imports sustainable, when the objective of the blending programme was to reduce the import bill of the country? 

A. Do we have enough feedstock to meet that target to reach E20 by 2025-26? I think not. Either we compromise on meeting the target or if you want to meet the target, then you import corn.  What is the big deal if the E20 target is not achieved? Leave it there. Let it be E15. How does it matter, really speaking?

 

Are we doing enough to boost our production and productivity so as to keep the biofuel industry and the bioenergy industry healthy? I think not. I don't think we are doing enough. We are trying to tide over the current problem, somehow or the other, without looking at long-term implications.

 

Q. On the demand side, are oil marketing companies eager about the ethanol program? Is there a robust infrastructure in terms of vehicle compatibility and are consumers adopting higher blends, especially when there is a shift to electric and CNG vehicles? 
A. The government never consulted consumers whether they wanted E10, E15, or E20. It was simply forced on the oil marketing companies. The petrol that you fill at the gas station today will probably have 10% or 15% blended ethanol. But were you consulted ever whether you want ethanol-blended petrol or you want only pure petrol?

Therefore, there is nothing to talk about on the demand side. We have to discuss only the supply side. Demand is simply enforced. There is no voluntary demand. Oil marketing companies will be looking at their profitability and infrastructure facilities (when going for higher blends). 

 

Q. If the government allows derivatives trading in suspended and other commodities, what kind of reaction do you foresee from the market?

A. Currently, the commodity derivative market is starved of contracts that have stood suspended for over two years now. Value chain participants have not been able to manage their price risk through hedging. Commodity price volatility is a function of several factors, not just derivatives trading. However, policymakers have assumed that derivatives create price volatility. If the suspension on commodity derivatives trade in some cases is lifted, I am sure that value chain participants will welcome this move.

 

But do not expect everyone to rush into this market immediately. There is a loss of confidence in the government's policymaking. Market participants are disappointed and discouraged by the sudden suspension of these commodities. Instead of tinkering with the derivatives market and policies, the government should actually focus more on strengthening the real economy, which includes the agricultural sector as a whole.  End

 

Edited by Saji George Titus

 

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