Defined: Why the Centre is appearing on rise in worth of edible oils

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Food inflation, especially in staple foods like legumes and edible oils, is the last thing a political party wants in the run-up to a crucial election. With elections in five states, including the all-important state of Uttar Pradesh, only a few months away, it is no wonder that the central government has taken price control measures through various measures. The uncertainty of the kharif harvest due to a not so well distributed monsoon has also made the government nervous about uncontrolled inflation in the coming days.

What steps has the government taken?

On Thursday, Manisha Sensarma, economic advisor for the Department of Public Food Distribution and Consumer Affairs, addressed a letter to the chief secretaries of all states and union territories Draw attention to the rise in the price of edible oil and oilseeds. “The undersigned has been instructed to say that the Essential Commodities Act 1955 aims to ensure adequate availability of the proposed essential goods at fair prices to the common people. Lately, despite the reduction in import tariffs, there has been a sudden surge in the price of edible oils / oilseeds, possibly due to the alleged hoarding of these oils by shareholders, ”the letter said.

Accordingly, the government has requested a declaration of stocks from traders, millers, warehouse keepers, etc., which would be checked by the state government. They were also asked to monitor edible oil and oilseed prices on a weekly basis.

This would be the central government’s second intervention in the control of edible oil prices. In early August, the import tariff on raw soybean and sunflower oil and refined sunflower and soybean oil was reduced. The current tariff on raw soybean and sunflower oil is now 30.25 percent, up from 38.50 percent previously. The tariff on refined oil was also reduced from 49.50 to 41.25 percent.

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The reason for this step is the increase in cooking oil prices by 20-30 percent compared to the previous year. Driven by a global trend, the prices of all edible oils across the country have increased significantly. The average sales price of peanut oil, which a year ago was 150.50 rupees / liter, has now risen to 177.91 rupees. A similar increase was seen in soybean oil (Rs 104.27 to Rs 151.43), mustard oil (Rs 126.17 to Rs 172.55) and palm oil (Rs 94.18 to Rs 132.46). Even Vanaspati (hydrogenated vegetable oil sold as an economical substitute for ghee or butter) has seen its price rise from Rs 94.18 to Rs 132.46 per liter.

Why the interventions when a new harvest is just around the corner?

Two main reasons stem from the decision so close to the start of the kharif harvest, which is expected to begin next month. As stated in the letter, the central government has taken this step with a view to increasing the price of edible oils. Before government polls, including that of Uttar Pradesh, food inflation is the last thing a government wants to face.

What the letter does not express is the nervousness of policymakers about crop security due to the uneven spread of the monsoons. As of Friday, the country had received 720.7mm of rainfall, up from the normal 777.3mm it was supposed to receive – an overall loss of 7 percent. The revival of the monsoons in recent days has brought relief to farmers, but the uneven distribution of rainfall has already taken its toll on crops. The long dry period, which began in July and lasted until the end of August, exposed the plants to maximum moisture stress during the crucial vegetative growth phase.

In its most recent Harvest Status and Health Report, the Indore-based Soyabean Processors Association of India (SOPA) stated that over 12.830 percent of the 115,513 lakh hectares (lh) sown were harvested in poor condition. In Madhya Pradesh, the largest soy-growing area in the country, over 8,741 lh of the total 51,068 lh area are in poor condition. Similarly, of the total of 8,537 lh of soybeans sown in Rajasthan, over 3,623 lh are in poor condition.

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India Pulses and Grains Association (IPGA) vice chairman Bimal Kothari noted the lull in monsoon activity in August. “Although the kharif harvest was sown little more than last year, the actual output will only be known during the harvest season. If the crops are exposed to heavy rainfall during harvest time, we can see some damage to the Urad and Moong crops. Rajasthan experienced a dry spell in August, so we can see a drastic decline in moong production in the state. However, everything will be clear by the end of September, ”he said.

Where else has the government stepped in to control prices?

Earlier this year, the rise in Dal prices had led the government to go all out in the legume sector. It began with the early announcement of import quotas in March and the abolition of the license requirement for imports in May. On May 14, the Ministry of Food, Public Distribution and Consumer Affairs asked millers, stockists and dealers to declare the inventory with them and instructed state governments to investigate. When all of the above did not have the desired effect, on July 2, the central government imposed storage restrictions on processors and traders, making over-management a crime.
Ironically, the imposition of storage restrictions comes almost a year after the Narendra Modi-led government changed the Essential Commodities Act 1955 to include oilseeds, legumes, onions, etc. However, since the Supreme Court suspended the law in January, the Central government fled into the law and imposed storage restrictions to control prices.