Time to review India's Food Trade Policy

Why India should rework its Food Trade Policy?

Shortsighted Political decisions destroyed the Bargaining Power of Biggest Consumer Market i.e. India

Sir ji, What is the way out?

To,
Honorable Prime Minister of India &
Honorable Finance Minister of India
New Delhi


Dear Sir,

It is the duty of the government to ensure food security for the masses and also to ensure that food security must be based on domestic production not based on imported food to protect our strategic and sovereign national interest.

As you are aware, carbohydrates, oils & fats and protein are the basic food components for any living human beings and animals. Today we are self-sufficient in carbohydrates only due to our policies for wheat and rice. It is high time we should consider how to fill the gap for oils and protein. Unfortunately, our soil health is suffering, our hum health is suffering, malnutrition is a serious issue due to our economic policies which lacks qualitative focus and dimensions, we still believe in outdated concepts of imbalanced quantity concepts. That is even the produced quantity of food is also not properly managed.

Based on large number of studies, it is clear that our import tax policies are not supporting production of edible oils and proteins in India as per prevailing conditions. It is hurting all the stakeholders except exporter of edible oils to India.

There is a need to have a serious look at it. Pl. have serious thinking and brainstorming, if required, I am willing to join the discussion with all facts and figures to support your decision making process. 

Let me share some practical aspects and reasons which undersigned feel you should consider in national interest.

S. No.	Concern	Why this concern and Possible Solution / Options?
1.	How Edible oil exporting countries taking benefit of India’s faulty economic policy?	Government of India kept Peak Customs Tariff at 300% while negotiating WTO Agreements. Effective rate of duty is currently Zero. In order to control inflation and to meet the gap between domestic production and consumption imports were allowed. Initially imported oil prices were kept very low so that domestic edible oil industry could not take the competition head on. Most of the edible oil industries in India are either closed down or are at port to process imported crude oil. Once India lost its focus from domestic production they started raising the price, in order to control the price government of India was lowering the customs duty. The biggest trap came when exporting countries imposed export duty on edible oils and government of India reduced the customs import duty to zero. This is classic case where political shortsighted first crippled domestic industry and now country is paying expensive foreign exchange and increasing current account deficit.
2.	In order to seek political support from exporting countries, we have destroyed our food Security?	In order to please international communities, government of India allowed duty free imports of edible oils and compromised domestic production systems.  Without realizing that India is one of the biggest markets in the world, we were bending backward to accommodate demands of our trading partners for our short term political objectives. They offered notional carrot to us and extracted pound of flesh with long term interest. On the one hand we were reducing our customs duty to reduce the import price; on the other hand they were introducing export tax to extract more from Indian consumers. Is there any other example in the world of this scale, a classic case of politics of trade?
3.	Do you know why this happens?	It happened when we think we know all dimensions o trade and there is no need to have wider consultation with actual players in trade. Discussion with few selected chamber of commerce dominated by large industrial houses with their single minded clear focus on shareholders’ interest, not national interest, leads to such shortsighted outcomes. Why policy debates are not happening in one, why justification for change in policy with facts and figure not placed on websites for better understanding by masses.  Why budget should be part of secret mission?  This indicates that governments do not have clear objective while framing the budget proposals and are extremely susceptible to pulls and pressures.
4.	Duty Free Imported Oil at below the cost of oil production in India will destroy the food security and Indian Public health the way Urea has destroyed soil health in India.	In order to meet the shortage of edible oil government has allowed duty import of edible oil. In short term, it appeared as we have controlled inflation by meeting demand and supply gap, but the fact is we have destroyed the source of valuable proteins for human as well as animals from the oilseed cake. When we produce oil seeds in India we get both oil and cake in equal proportion. When we import edible oils we do not get cake which is a valuable source of protein for animals and humans.
5.	Indian Population is suffering from protein deficiency.	In order to meet the shortage of protein we are importing pulses. It is like first we kill oilseed production without realizing that oil seeds give us oil and proteins. We can meet the oil deficit, but what about protein? By producing more oil seeds in India we can supply both oil and protein (cake) to the Indian population and perhaps reduce the import of pulses.
6.	Farmers are willing to grow but government is not encouraging. Farmers are willing to break wheat-rice cycle but government policies are not supporting.	Farmers are worried about price fluctuation in international markets. Duty Free Edible Oil adds to serious price risk for farmers. Government policy is shortsighted to ensure balanced food security in India. Soon we will have serious implications.
7.	Farmers in Haryana, Punjab and western UP not willing to move away from wheat and rice crop cycle because the cost of edible oils and pulses depends upon international prices and they are not sure what will happen if international prices crash. At least in wheat and rice, government is assuring minimum support prices and assured purchases by FCI.	Develop a protect margin for the farmers by bring a customs duty of about 20 to 30 % on imported refined edible oil. So, that whatever is the price in international market it will always provide cushion to farmers to grow edible oil seeds. This should be supported by propagating the efficient cultivation of oilseed crops (mustard, soybeans, ground nut, canola, sesame, etc.) in India through high quality seed supply and education.
8.	What government should do to meet edible oil, protein and current account deficit target? Is it possible all in one approach?	Yes, it is very much possible and doable. ·         We should promote oil seeds which are rich in oil as well as protein. ·         Crop which can be used as fodder for animal. ·         Crop which can be used as substitute for wheat. ·   Crop which can give same or more profit to farmers. ·        Crop which can improve the soil health. ·   Crop which needs very less water compare to wheat and rice. ·     Crop which is easy to store, process and can be used for human as well as animals as per the requirement. ·    Crop which can encourage small scale non-polluting industries. ·       Crop which enhances milk yield, egg yield, honey production, etc. as by-product. These items will give edition income to farmers, healthy diet to consumers and improve exports from India to earn foreign exchange.
9.	Which crop can give this multiplier effect?	Based on global experience and continue to track the new developments world-wide, the crop which can deliver all these benefits is Canola. It is a new crop for India but meets many objective for which Government of India is striving for. Canola is a recent development in International market. After few years of research, Indian Seed companies are ready to deliver for what government of India is looking for. Example: Canola is appearing as wonder crop for farmers in Punjab and Haryana, but area is not going up because of tax free imports of edible oils. Oil seed production in general is not going up in any part of India. With growing population and per capita income, it is a dangerous sign and will have serious impact on current account deficit. There is International data to show that if canola crop is rotated with wheat it can help to increase wheat yields by 800Kg/ha which is almost 30%.
10.	What government should do?	Government of India must come out with a taxation policy which ensures that income from oil seeds especially canola is always higher than wheat. This will reduce the burden on Food Corporation of India. There is ready market for Edible oils and proteins because of shortage in domestic market. This will reduce dependency on imports. In short term it may look inflationary, but in fact it is not. Bringing customs duty is sensible approach because rising current account deficit will impact dollar value and will increasing inflation due to expensive dollar used for import of edible oils and pulses.
11.	What Government and Country will gain?	·  Today, we are importing edible oil worth USD 10.00 billion plus. 30% duty means USD 3.00 billion as direct tax revenue for the government. ·    Reduced burden on Food Corporation of India (FCI), Public Distribution System (PDS) and food subsidy. Supreme Court of India has already directed to close down this defective and inefficient system. ·      Saving is fertilizer, water and power subsidies on wheat and rice because Canola and other oil seeds less inputs compare to wheat. ·    Saving in foreign exchange outgo and control of current account deficit. ·     Pulses import will also reduce because domestic production of protein will supplement animal feed requirements. This will also save foreign exchange. ·       Livestock production will go up, which can facilitate export of livestock product. ·  Human Health related expenses will go sown because according to food science, canola oil is the best edible oil for heart. This can be checked based on oil science. ·     After harvesting, Canola plant will also meet the feed requirement for animals. ·    Canola also facilitates natural bio-fumigation of soil, which enhances yield of next crop and reduces the need of agro-chemicals for the next crop, means farmers overall cost of production comes down. Global experience says after canola, in next wheat crop yield is up by 20 to 30%. Still our agencies are not promoting the canola crop why? This needs to be investigated by researchers.
12.	How to control food inflation for Needy people?	Average consumption of oil in India is about 1 liter per month per head. 30% import duty on oil means it is about 25 paisa per day per person. The production of oil seeds in India will improve livestock sector and prices of eggs and milk will either come down or will remain static and this will lead to saving of Rs. 1 per day per person. Cheaper imported oil will increase the deficiency of protein in human food and animal feed. This will lead to inflation in pulses, milk, meat, eggs etc. due to high feed cost.   In short term, revenue generated from the additional customs duty on edible oils can be used to provide direct cash transfer to need Below Poverty Line (BPL) families for purchase of edible oils. This will ensure that we develop domestic production base at the same time only needy gets the benefit. Part of the collected revenue from the Import duty can be given to farmers in the form of sprinklers, seeds etc. to promote oil seeds and pulses production.
13.	Proposal on behalf of all the well-wishers of India’s food security.	Introduce 30% customs duty on refined edible oils or about 15% customs duty on crude edible oils to encourage domestic production of edible oil seeds to meet growing demand for oils and protein. This will also protect foreign exchange used for import of edible oils, pulses, etc. With one sensible decision we can meet many targets with one sensible decision. Is there any better way of meet national objectives?

Sir, I am willing to come and discuss the matter with you in person. All righted minded citizens are with you in addressing national food security and economic development issues.

We all are looking forward to see the Vision and Action Plan of the Government for Development of Domestic Edible Oil and Protein Sector of India at faster growth rate than growing demand for consumption to ensure proper health for citizens, animals, soil and Indian economy.

It is time for talking bold steps in national interests and to provide better returns to farmers in place of international edible oil and pulses traders.

With regards,

Vijay Sardana

Concerned Citizen with

Interest in Food Security of India