Twice in a matter of just over a year, Vietnam has imposed a ban on groundnut imports from India. Sanjiv Sawla, Chairman, Indian Oilseeds and Produce Export Promotion Council, explains what the move means for Indian exporters and what can be done to boost exports of the oilseeds (and produce) industry.
Interview by Anishaa Kumar | April Issue 2017 | The Dollar Business
TDB: What are the major challenges that the oilseed industry is currently facing? How is Indian Oilseed and Produce Export Promotion Council (IOPEPC) helping exporters overcome these hurdles?
Sanjiv Sawla (SS): We are facing a shortage of quality products to export. When you look at peanuts, it’s the size or the variety that matters. Although some varieties are acceptable, we certainly need to develop varieties that are more aligned with global demand. The case is similar with sesame seeds. There are some large producers who produce double-skinned sesame, which is a lower oil content product. This should be replaced with white sesame, which is a single-skinned variety with higher oil content and has better acceptability abroad.
Further, exporters often work on wafer thin margins and because of this they sometimes compromise on either the quality of the product or delay shipments. And that, in turn, does not augur well for exports in the long run and also damages the image of the country.
To assist our exporters, we regularly organise buyer-seller meets apart from helping them participate in various trade fairs across the globe. The key focus this year would be to tap Central Asian and Latin American countries, which continue to remain unexplored.
TDB: Vietnam recently imposed a ban on groundnut imports from India, citing quality issues. What steps are being taken to address the issue?
SS: In 2015, Vietnam had imposed a similar ban and the quality of cargoes at that time did have issues. Following that, officials from India and Vietnam mutually agreed on a standard operating procedure (SOP) wherein only units registered with the plant quarantine (PQ) department were allowed to export groundnuts from India. As we understand, these units are complying with the quality requirements. This time the ban seems to be politically driven – may be due to pressure from the Chinese government. We don’t see any rationale on the quality front to justify a ban. We are looking at the possibility of taking a delegation to Vietnam in the coming months to meet the plant quarantine department there and resolve this issue.
TDB: Do you see any possibility of the ban spilling over to other countries?
SS: Vietnam imported about 18,400 metric tonne (MT) of groundnut from India in FY2016, way lower than the 183,771 MT imported in FY2015. The country may now start looking at other agri products from India with suspicion. And it does impact India’s image as a quality supplier. However, other countries from the region such as Indonesia (imported about 174,000 MT in FY2016), Malaysia (72,211 MT), Thailand (63,048 MT) and Philippines (50,699 MT) continue to import from India.
TDB: What do you think the government can do to increase production of oilseeds and boost the sector’s exports?
SS: Agriculture being a central as well as state subject, there often tends to be a conflict. What is missing is a synchronisation between the two governments. Both should come together to support our farmers. In terms of exports, states have different taxation systems which creates many hurdles. We hope that with Goods & Services Tax (GST) on the anvil, a large part of this will be addressed. But there are still uncertainties regarding what will be included and what will be excluded when GST finally comes into effect. However, transportation subsidy for certain areas will provide a major relief.
TDB: China and Japan are major importers of oilseeds. However, despite an increased production in FY2016, India still ships small volumes to these markets. Do you see this trend changing in the near future?
SS: Frankly speaking, we don’t see this trend changing. We will continue to be a minor exporter to these markets. In the case of China, we are not able to export because of import duties levied by China on both sesame and groundnut seeds. As far as Japan is concerned, they had an issue with pesticides in Indian sesame and are hesitant to buy. We are working on creating standard operating procedures and building confidence in the Japanese mindset about Indian products.
"Exporters are now investing in infrastructure to move up the value chain"
TDB: Is there a trade agreement on the table to help break into these markets?
SS: At the ministerial level, both sesame and groundnut seeds have been flagged for about two years now. But this is going to take its own time because if we want an exemption on import duty on our sesame and groundnut, the Chinese government will also want a similar exemption on a few of their products. So, it is a trade-off between the export that India can generate from these different products vis-à-vis Chinese exports to India, if India gives a reciprocal relaxation on some import duties. That is something the government is working on and it is aware of the issue. If not a complete zero duty, it can hopefully be brought down a few notches. But, I believe that this will take time and will happen gradually over the next two to three years.
TDB: Talks are rife that India may be able to reduce dependency on imports owing to high domestic production of oilseeds. The Ministry of Agriculture’s advance estimates place cash crop production for FY2017 at Rs.335.96 lakh tonne, up 33% from Rs. 252.51 lakh tonne in FY2016. Your take?
SS: As we are a growing economy, our per capita consumption of oilseeds will also increase, year-on-year. Production will have to keep pace, else the deficits will continue to stay in place or may even increase. So, India should continue to focus on high-value oil seeds and high-value grains as far as possible.
Malaysia and Indonesia have brought in great efficiencies with palm oil. If we try and get into that scale of production and efficiency, we will be competitive and should be able to reduce our imports from these countries. Until that happens, we must accept that we will continue our imports of oil at $800 per MT. Having said that, if we are able to achieve efficiencies and do value addition, we can export oilseeds with 50% oil content at a much higher price than we do today.
As far as domestic producers are concerned, instead of encouraging import of oil the government should encourage the import of oilseeds so that when the oilseeds come in the local crushing industry is able to generate significant business. We also need to remember that we are a rain-fed economy. Hence, the situation is very dynamic and changes every three months. Advanced estimates are based often on planting numbers and not the actual harvest. So, to that extent, they are subject to change.
TDB: Did the Union Budget 2017 meet your expectations?
SS: Most oilseeds are tax-free at local levels. We were not looking at anything significant to come out from the Budget. But yes, the import duties on oilseeds, which I mentioned earlier, if they come down a bit, it would help. The minimum support prices (MSPs) are in place but the government often does not have the right mechanism to buy the produce. For instance, the prices of groundnut in Gujarat continue to be much below the MSP – five months into the season and the government has procured only 3 lakh tonne, which is roughly 10% of the total produce. The logic behind having an MSP is that if a few months after the harvest season a material is available below MSP the government will procure the produce. The government could have and should have procured more. In Rajasthan too, we have not heard of any purchases even though the prices were much below the MSP.
TDB: What positive trends have you noticed in the industry?
SS: Many oilseed exporters are now investing big time in infrastructure and value addition. Even when it comes to oilseed processing industry, we are slowly moving up the global value chain. These are definitely some reasons to be optimistic about the future of India’s oilseeds industry.
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