It shatters the farmers, the silent majority in this country. This also keep thousands of solvent extractors and oil refiners to less than 40 per cent capacity utilisation as import of oilseeds is not permitted. Oil traders fear catastrophe in the long-run. Its symptoms are already visible in Kerala with people boycotting imported palm oil and its vendors.

The confusion is worse than confounded by the indecision of the Union government on the rate of import duty. It is in such an uncertain situation that the Central Organisation for oil industry and Trade and TamilNadu Oil and Seeds Association is organising the 38th all India Convention of Oilseeds, oil trade and Industry 2000 on Saturday and Sunday in Chennai.

Oilseeds and oils traders and some of the policy makers, scientists and researchers would sit down to take stock of a situation which is slowly getting out of the hands of India.

The edible oils market no more is in the hands of Indian farmers, refiners or traders. Up to 1994 the Indian production and products arrivals determined the oils prices in the market. Now it is the production and prices of palm oil in Malaysia and Indonesia that determine the prices of oilseeds and edible oils here, say informed trade sources.

The excess production of edible oils in those countries and India's liberal import policy have depressed prices in India and the farmers are not getting even subsistence price. They are forced to sell far below cost of production. Rs 30 a kg of edible oil is the lifeline price. Now they do not even get Rs 20. Coconut is priced below Rs 2. This would jeopardise the oilseeeds cultivation. Most of the oilseeds are rainfed annual crops.

Coconut is the only exception. Continuous unsustainable prices would force the farmers to stop cultivation of groundnuts, mustards etc and India will become all the more, even totally, dependent on imports.

This is a very dangerous situation. Any upheaval in the Malaysian or Indonesian palm oil production and markets will upset India's edible oils security. The present low prices may start to skyrocket and would become a more unsustainable drain on foreign exchange than the other oil, traders say.

The convention would ask the government to take corrective steps to protect the oilseeds farmers, refiners, solvent extraction industry, and long term interest of the country and consumers.

The major issues of discussion would be the government indecision on edible oils import duty, multiple rates on their imports by traders and refiners - two undefined and inseparable entities - and rationalisation of duty structure according to the arrivals of Indian oilseeds into the market.

Statements by Union ministers about the impending duty hike, without any intention to do so, are keeping the traders guessing. It would also mislead the exporters in other countries.

The Union minister for food and civil supplies Mr Shanta Kumar had announced more than once in October and again in November about impending duty hikes.

But so far no firm announcement had been made and traders are holding on to their stocks and creating confusion in the market place.

Dual duty system for import of edible oils for refining and sales (for traders) is another issue that is creating lot of chaos in the market with nobody able to draw a clear-cut differentiation between the two. Often traders import oils under the guise of refiners and resort to high-sea sales and give a run to the genuine traders who have to pay higher duty. Why such double standards when they cannot be implemented, traders ask and the convention might call for corrective steps.

The government would be requested to rationalise the edible oils duty structure according to the Indian harvest seasons and changing demand pattern. In India the peak demand for edible oils is during the festive season of July to November. During this period Indian edible oils production is at its lowest. The kharif crop arrivals start only in December. However, July-November is peak season in Malaysia.

The trade circles suggest that there should be a lower duty structure during this season and higher duty when the Indian products arrive in the market, say from December to July. this would ensure adequate supplies and viable prices both for the farmer and consumer.

The convention may draw special attention on coconut oils as it is the worst victim of the liberal oils import policy. It is affected by several factors.

The vanaspati manufacturers are allowed to import crude palm oil at a concessional duty of 10 per cent. By refining the crude palm oil they get as bye-product palm fatty acid which is used as a susbstitute for coconut oil in soaps and shampoo manufacturing. For direct import of fatty acids the duty is 55 per cent. Vanaspati companies save 45 per cent and effectively price out coconut oil.

Similarly the cheap palm kernal oil available in Malaysia and Indonesia is imported to be used as coconut oil substitutes. There could be some control on the import of this product by imposing higher duties.

Even in the local market the high excise duty on packed coconut oil used as hair oil is another hurdle in coconut oil sales.

It is not easy to get out of coconut cultivation. But if the prices are continuously unremunerative the farmers may not care for the existing trees and stop fresh plantings and in the long-term there could be a critical situation of shortage of coconut oils.

The one important call from the convention would be that the government and policy makers should not be complacent at the current easy situation of edible oils based on the Malyasian palmoil. They should revive the pre-1994 mission of self-sufficiency in edible oils should and ensure edible oils security as part of the national food security by encouraging oilseeds cultivation by offering remunerative prices to the farmers.