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More recent evidence indicates that the problem is unlikely to
disappear. It is estimated that imports would be even higher in the
current cotton year, despite the fact that the Cotton Advisory Board has
projected output at 175 lakh bales in 1999-2000, as compared with 163.5
lakh bales in the previous year. Further, initial stocks this year are
placed at 49 lakh bales as compared with 36.5 lakh bales in 1998-99. High
production and larger initial stocks suggest that cotton prices would rule
much lower during the coming cotton season. In fact, reports from
different parts of the country indicate that cotton prices have fallen by
10-20 per cent during November. Yet, cotton imports during the current
season have been projected at 8 lakh bales, compared with 5 lakh bales in
the previous year, because imported cotton enjoys both price and quality
advantages. The problem is that with international prices easing as well,
it is expected that the price parity between domestic and imported cotton
is unlikely to be disturbed during the year, resulting in a persistence of
the import surge.
All in all, therefore, recent trends do suggest caution when claiming that
India would benefit substantially from agricultural trade liberalisation.
The experience with two of the commodities considered front runners in
terms of competitive advantage, namely rice and raw cotton, reflects price
and trade trends which suggest that such advantage is tenuous to say the
least.
While foreign exchange gains from agricultural trade
liberalisation are thus uncertain, there are signs that losses in terms of
additional post-liberalisation outflows on account of imports can be
significant. While imports of cereals are in general canalised through the
Food Corporation of India, coarse and common varieties of rice and rice
with 50 per cent broken content are allowed to be imported freely. All
cereal imports are not subject to any duty. Chart 4 shows that
during the 1980s, foodgrain imports were extremely volatile, rising
sharply in the wake of bad or indifferent harvests of the kind seen in
1979-80, 1982-83, and 1987-88. Thus import movements were clearly related
to domestic production trends. While this remained partly true in the
1990s, there has been a tendency for imports to rise after 1995-96 and
remain at moderately high levels. From a low level of just 8.3 thousand
tonnes in 1995-96, cereal imports rose to 6.1 lakh tonnes in 1996-97, 14.9
lakh tonnes in 1997-98 and 11.5 lakh tonnes in the first eight months of
1998-99. Almost all of these imports were of wheat, since there were
virtually no imports of rice during 1996-97 and
1998-99.
Chart 4 >>
In the food products area, the real impact of liberalisation has occurred
in vegetable oils. Though oilseeds imports are permitted, imports take the
form of edible oils, which are freely importable except for coconut oil,
RBD palm oil, RBD palm stearine and palm kernel oil, which till April 1,
1999 were canalised imports. As Chart 5 shows, imports of edible oils rose
sharply from 103,000 tonnes in 1992-93 to 347,000 tonnes in 1994-95, 1.06
million tonnes in 1995-96 and 1.42 million tonnes in 1996-97. Though
imports dipped slightly to 1.14 million tonnes in 1997-98, they rose
sharply again and stood at 1.71 million tonnes during the first eight
months of 1998-99.
Chart 5 >>
These imports occurred despite a continuous rise in
the unit value of edible oil imports from Rs. 6.2 per kg. in 1990-91 to
Rs. 30.13 per kg. in 1998-99. While a part of this increase in the unit
vale of exports may be on account of a shift to higher value oils in the
import basket, the data suggest that a combination of taste changes and
domestic price trends have worked against the domestic oilseeds and
vegetable oil producers. In one instance, viz. soyabean oil, where,
according to one estimate, earlier price relatives where in favour of the
domestic trade once again a rise in domestic prices has eroded the price
differential, rendering imports an attractive option.
Chart 6 >>
Chart 11 >> |
