In a country where exports of any variety of foodgrain is a very delicate issue and invariably assumes political colours, being the Chairman of an industry bloc such as the Indian Oilseed and Produce Export Promotion Council (IOPEPC) is definitely not easy. In an exclusive interview with The Dollar Business, Kishore Tanna, Chairman, IOPEPC, discusses issues that are troubling the oil seeds sector and all that’s needed to be done to make India a force to reckon with in the global market. Exclusive excerpts:

Jayashankar Menon | @TheDollarBiz

TDB: A couple of weeks back, the government took a proactive step to encourage exports of the oilseed sector  by altering the minimum export price. Are you pleased with the decision?

KT: We are thankful to the central government for bringing down the minimum export price (MEP). But there is a need to have a liberal and consistent export policy. Frequent changes in policy are not healthy.  

TDB: The latest reduction in the minimum export price on edible oil is likely to boost exports, particularly groundnut oil. What is your opinion?

KT: The reduction in MEP for edible oils from $1,400 to $1,100 will definitely  boost exports. This is because recently there has been a fall in international prices of edible oils, especially groundnut oil. With groundnut oil being the most exported edible oilfrom India, the exports are bound to rise in the near-to-medium-term.

TDB: How will this benefit exporters?

KT: Due to a bumper crop in major groundnut producing countries like US, China, Argentina, etc., and with stocks already at a record high, price of groundnut oil has crashed from a level of $2,450/MT in FY2012 to about $1,100/MT at present. With oilseed production in India also high in FY2014, the reduction in MEP will provide the required thrust to exports of edible oils.

TDB: In December 2013, the minimum export price was reduced from $1,500/MT to $1,400/MT. What impact did it have on exports?

KT: There has been a consistent slide in international prices of groundnut oil since FY2012. So, the reduction from $1,500/MT to $1,400/MT in MEP was not sufficient to make a material difference to exports. The Indian Oil Seeds & Produce Export Promotion Council (IOPEPC) has been requesting the government to reduce MEP all throughout. Our voice was finally heard.

TDB: Which are the main export destinations for Indian edible oil?

KT: We mostly export edible oil to China, Netherlands, France and Italy.

TDB: How realistic is the hope of groundnut oil export breaching the 25,000 MT mark this year?

KT: A bumper crop and a lower MEP will certainly help in increasing exports but the mandatory export in 5 kg branded consumer packs is a major constraint. Other countries offer edible oils in bulk, which is cost-effective and can be repackaged as per the requirements of the customer in the importing country.

TDB: Does fixing the floor price make groundnut oil exports the most viable among all edible oil varieties?

KT: Groundnut oil ranks at the top among edible oils exported from India. It is a premium oil and its cost is also high. Most other edible oils are priced lower than groundnut oil. Thus, lowering MEP will mostly give a fillip to premium oils, including Sesame oil.

TDB: What scope do you see for the export of cottonseed oil? Which geographies are interested in importing it?

KT: Cottonseed oil exports from India is very low. It was only about 200 MT last year. It is mostly exported to Nepal, Pakistan, Sri Lanka and Netherlands.

TDB: Reports suggest that there is a lot of potential for increasing groundnut oil exports from the country. How do you think this can be achieved?

KT: Although the size of the global groundnut oil market is about 188,000 MT, during FY2013, about 16,500 MT of groundnut was exported from India. With liberal export policies and a good domestic crop, exports are expected to exceed 25,000 MT in FY2015. Gujarat, Andhra Pradesh, Karnataka, Tamil Nadu, Odisha and Rajasthan are the major groundnut producing states in India, while groundnut oil units are mostly located in Gujarat.

TDB: Policymakers do not still welcome wholeheartedly the idea of edible oil exports. Do you think the government should shed all fears?

KT: Exporting higher quantity of premium high value edible oils will have no adverse impact on domestic oil prices. In fact, we can import much larger quantities of vegetable oils if we start exporting high-value edible oil from India. Our estimates suggest that with the export of a single unit of premium edible oil, about 1.25 to 2 units of other oils such as Palm oil or degummed soybean oil can be imported into the country.

TDB: The cap of 20,000 MT was removed last year. What impact has this had on exports?

KT: The cap was removed in February 2013, but with a high MEP of $1,500 imposed. At the same time, while India had a bad monsoon, other groundnut producing countries like US and Argentina recorded bumper crops. This led to a slide in international prices making Indian exports became unviable.