In a significant move for oilseed farmers across India, the central government has taken two major steps to support their interests. These decisions are expected to impact not only the agricultural sector but also the political landscape as elections in key agricultural states approach.
Haryana and Maharashtra, two of India’s largest agricultural states, are preparing for assembly elections. While Haryana’s elections are set for October, Maharashtra could see elections in November. The government’s latest moves may influence the vote in these regions, though the long-term effects on farmers remain to be seen.
Key Changes: Import Duty on Edible Oils
The Modi government’s first decision is a bold one. To shield domestic oilseed farmers from the competition posed by cheaper imported oils, the import duty on crude palm oil, soybean oil, and sunflower oil has been significantly increased. Previously, there was zero import duty on these products, but now the duty stands at 20%.
This change is a welcome one for farmers who have been struggling with low market prices due to high imports of cheaper foreign oils. With this increased duty, domestic producers are likely to get better prices for their products, allowing them to compete more effectively in the market.
In addition to the crude oil duties, the government has also raised duties on the refined versions of these oils. The duty on refined oils has jumped from 12.5% to 32.5%. When combined with the agriculture infrastructure and development cess (5%) and the social welfare surcharge (10%), the total import duty now stands at 27.5% for crude oils and 35.75% for refined oils. This change marks the first time since October 2021 that such duties have been imposed.
Why the Move Matters for Farmers
India is one of the largest consumers of edible oils in the world, and the country imports a significant portion of its oil needs. In 2022, the country imported 16.5 million tonnes of edible oils. However, in 2023, imports have fallen by 3.6% to 13.5 million tonnes. Despite this drop, the country still faces strong demand for oil, which is growing by around 1 million tonnes each year.
This growing consumption, combined with falling global prices, had made it difficult for domestic oilseed farmers to sell their products at competitive prices. The new import duties are expected to provide them with the necessary protection to improve their profitability.
Economically, the move comes at a time when India’s oilseed production is expected to be strong this year. This is largely due to favorable weather conditions and government initiatives aimed at providing better support for farmers. Inflation in edible oil prices has also been low, with August 2023 showing a decrease of 0.86% in oil inflation. Overall, the domestic oilseed sector appears to be in a strong position moving forward.
MSP Support for Soybean Farmers
Alongside the import duty changes, the Modi government’s second major decision is to allow the procurement of soybean at the Minimum Support Price (MSP). This decision has been made in collaboration with state governments, with states like Maharashtra, Madhya Pradesh, Karnataka, and Telangana giving the green light to buy soybeans from farmers at the MSP.
MSP is a government-fixed price designed to ensure that farmers receive a minimum price for their crops, regardless of market fluctuations. This provides a safety net for farmers and ensures that they are not forced to sell their crops at a loss when market prices drop.
By implementing MSP procurement for soybeans, the government is giving oilseed farmers an additional layer of protection, which should help to stabilize their income. Maharashtra, India’s second-largest soybean producer, stands to benefit significantly from this policy change, which is likely to be politically advantageous for the government ahead of state elections.
Election Impact: A Strategic Move?
While these decisions are rooted in economic policy, they also carry significant political weight. Maharashtra, in particular, is a key agricultural state with a large population of farmers who could be swayed by government initiatives aimed at supporting their livelihood.
With assembly elections expected in Maharashtra later this year, the increased import duties and MSP support may play an important role in securing the farming vote. Although it remains to be seen how these policies will impact the election results, there is no doubt that they will be viewed favorably by farmers who have been grappling with market challenges.
The Road Ahead for Oilseed Farmers
The Modi government’s decisions to hike import duties and allow MSP procurement are positive steps for India’s oilseed farmers. With these changes, farmers are likely to see better prices for their crops and enjoy increased financial security, especially in a year when oilseed production is expected to be strong. While these measures may also have political implications, their primary focus is on supporting the agricultural sector and ensuring that domestic farmers can compete in an increasingly globalized market.
