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Current Affairs

Edible oils turn costlier

Date: 31 May 2021 Tags: World Economy

Issue

The prices of edible oil have rise steeply over the last few months. This is likely to put more financial strain on the government.

 

Background

The sharp rise in price is visible in times where household incomes have plummeted low due to the pandemic.

 

Details

  • The rise of edible oil prices have been between 20 percent and 56 percent. The oils include mustard oil, soya oil, vanaspati oil, sunflower oil and palm oil.

  • The price of packed mustard oil has rise by 44 percent over last year. Sunflower oil and soya oil prices too have rise by over 50 percent.

 

Consumption of oil

  • The share of refined oil such as sunflower and palm has been high in urban areas. In rural areas, mustard oil has highest consumption. This is mainly due to changing food habits.

  • The consumption rate of oils has increased year by year due to easy availability of oil in domestic as well as international markets.

 

Production of oil

  • The rate of consumption and domestic availability does not match. This has forced India to import majority of its oil needs.

  • In the year 2019-20, India has imported about 56 percent of its oil demands through imports. They include palm, sunflower and soya bean.

  • The major import sources of oil are Brazil and Argentina (soya bean), Malaysia and Indonesia (palm oil), Argentina and Ukraine (sunflower).

 

Reasons for price rise

  • The major reason for price rise is the sharp increase in international future contracts. Since our majority supply is imported, the effects are more intense.

  • Another reason is the increase in production of biofuel from vegetable oil. This has been particularly visible in countries such as USA.

  • The La Nina has destroyed large plantation of oil crops in Indonesia as well as Argentina. This has created shortages of availability.

 

Measures to reduce price

The best method would be to decrease import duties on the vegetable oil from other countries. Cess imposed should be taken back.