June 22, 2017 / 6:20 AM / 2 months ago

India farm protests push for rise in edible oils import tax

A man carries empty aluminium tins used for edible oil past a stack of tins at a recycling yard in Ahmedabad October 18, 2011.Amit Dave/Files

MUMBAI (Reuters) - India's government is facing mounting pressure to raise import duties on edible oils after farmers staged mass protests in key farm states amid a slump in oilseed prices to below government support levels.

Local oilseed crushers are struggling to compete with cheaper edible oil imports from Indonesia, Malaysia, Brazil and Argentina, reducing demand for local rapeseed and soybeans, even after prices tumbled by a third over the past 14 months due to bumper global production.

Politically powerful farm groups want the government to raise import duties, boosting margins for local oilseed crushers like Ruchi Soya and encouraging cultivation for the 2017/18 season.

"It's high time to do it. The sowing has started and prices are below the support level," said Davish Jain, chairman of the Soybean Processors Association of India (SOPA). "Some farmers have already decided to switch to other crops."

India, the world's biggest palm and soybean oil importer, now relies on imports for 70 percent of its edible oils, up from 44 percent in 2001/02.

Prime Minister Narendra Modi, who had promised to double farmers' incomes over five years, remains a popular leader three years into his term. But unrest has flared in states ruled by his Bharatiya Janata Party (BJP), catching regional leaders flat-footed.

In Madhya Pradesh, the top soybean producing state, five farmers were shot dead during protests earlier this month.

Farmers are demanding better prices for their produce and billions of dollars in debt relief after BJP governments in Uttar Pradesh and Maharashtra announced a more than $10 billion loan write-off for farmers.

Industry body, the Solvent Extractors Association of India (SEA), has petitioned the government to raise the duty on crude vegetable oils to 20 percent and on refined products to 35 percent, from 7.5 percent and 12.5 percent currently.

Trade officials say lower food price inflation in India will make it easier for the government to raise import duties, protecting farmers without hurting consumers.

"Raising the import duty can help put a damper on imports as well as encourage domestic crushing and refining," said Dinesh Shahra, managing director of Ruchi Soya.

Finance ministry spokesman D.S. Malik declined to comment.

While the government fixes minimum prices for more than two dozen farm commodities, it mainly buys wheat and rice. In the absence of support, local prices move in tandem with overseas prices.

Many farmers were forced to sell soybeans at 2,550 rupees per 100 kg in the spot market, below the support price of 2,775 rupees, which has been raised to 3,050 rupees for the 2017/18 season.

Meanwhile, India's soybean stocks are likely to hit 1.83 million tonnes at the end of this year, up from 441,000 tonnes at the start of the marketing year on Oct. 1, SOPA estimates, as an appreciating rupee makes soymeal exports unattractive.

"The government should try to boost oilmeal exports by giving some kind of incentives for exports. It will help in reducing inventory," said Ali Muhammad Lakdawala, procurement in charge of Oils & Fats at diversified consumer company ITC Ltd..

Reporting by Rajendra Jadhav; Editing by Richard Pullin

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