The ever-increasing import bill of edible oil has become a chronic problem for India with edible oil being the third largest among imported goods in India, next only to crude oil and gold. There are structural issues in production, productivity, and trade of edible oils. These energy-rich crops are grown in energy-starved conditions where more than 70% of the area under cultivation is rain-fed and often cultivated with low-quality seeds in a fragmented landholding and outdated agri-management practices. It further studies the trade liberalisation measures of a liberal trade policy regime, lower import duties, duty-exemptions under free trade agreements, and changes that India has witnessed in consumption as well as retail of edible oil.
Even after deregulation of pricing, the movement of retail prices of petrol and diesel is not directly related to global crude oil prices. Taxes make up around two thirds of the petrol and diesel prices paid by consumers.
Crude oil price becoming negative is one of the rare events that happened after World War II in the energy sector. The real reason for oil prices to move into sub-zero level is not attributable to supply–demand mismatch, rather it owes to the timing of this movement and specifically what is popularly known as the “day-of-the-week effect.” Though India is importing almost 82% of its oil, falling global crude oil prices are not going to benefit the end users much. But, the interaction effect of the lower crude oil price with COVID-19 is definitely going to have an impact on the country and investors.
Will the government postpone the dismantling of the administered pricing mechanism (APM) for petroleum products beyond the current schedule of April 1, 2002? Given the mounting oil pool deficit and the professed disinclination of the finance ministry to take the pool account deficit on to the budget, such a possibility cannot be ruled out. It would be an unfortunate development, however, and wholly avoidable. The government must take a firm stand on sticking to the current timetable for freeing up petroleum product prices. Further, decontrol must go beyond prices and extend to removing the stifling restrictions currently proposed for entry into the business of marketing oil products.
