Edible Oil Trade Liberalization in India: What Can We Say from Policy Perspective?
India moved towards trade liberalization in early 1990s’ and edible oil was one of the sectors where import liberalization started intensely. Starting from near-autarkic policies that prohibited import of either edible oils or oilseeds, restrictions were relaxed and tariffs reduced on edible oil imports. India is now the world’s largest importer of edible oils and imports account for 70% of domestic consumption. Among all edible oils, palm oil constitutes the dominant share in India’s edible oil import. The access to cheaper imported oil increases its consumption. This is reflected in the increasing share of imported palm oil in the edible oil consumption basket during the post trade liberalization era. But the increase in edible oil consumption increases fat intake and leads to adverse health consequences. The trade liberalization of edible oils also has negative impacts on the domestic oilseeds sector in India. The decline in the tariff rate of imported oil reduces the demand for traditionally produced edible oils (like groundnut oil, rapeseed-mustard oil). Oilseeds are inputs to edible oil production. Therefore, decrease in the demand for traditional edible oils has adverse impact on the domestic oilseeds sector. We find evidence of reduction in the area devoted to traditional oilseeds production in the post trade liberalization period. Several oil mills which used to extract edible oil from domestically produced oilseeds have shut down. This article discusses the possible policy measures that can be implemented to protect the domestic oilseeds farmers as well as oilseeds industry.
|Journal||International Network for Economic Research Policy Brief Series|