Current Economic Statistics and Review For the Week Ended September 15

Economy of Edible Oilseeds and Edible Oils *

Edible oils are one of the most sensitive, essential and irreplaceable commodities in Indian food basket. They constitute an important component of Indian households’ expenditure on food. According to NSS 61^th Round (January-June 2004), average monthly per capita consumption expenditure (MPCE) of edible oil in food was 4.6 per cent in rural India , and 3.5 per cent in urban India . The share of edible oils has increased as per successive NSSO surveys. Edible oil products comprise of four broad categories, namely, vegetable refined oil, hydrogenated oil (vanaspati), bakery fats/margarine, and de-oiled cakes. The production of edible oils in India is dependent on the production and availability of oilseeds.

Economy of Oilseeds

The country, blessed with different agro-climatic conditions, produces a wide range of oilseeds, which act as a primary source for edible oils produced in the country. A total of nine oilseeds, traditionally cultivated in the country, include groundnuts, mustard/rapeseed, sesame, safflower, linseed, nigerseed, castor, soyabean and sunflower. Groundnuts, soyabean and mustard have been the major contributors to the oilseeds production with their combined share standing at more than 85 per cent of the country's oilseeds production. Apart from these, secondary sources, namely, coconut that forms a part of plantation crops, rice bran and cottonseed, which are non-conventional sources, oilseeds of tree and forest origin that grow mostly in tribal inhabited areas and oil palms grown in Andhra Pradesh, Karnataka, Tamil Nadu, Kerala and Andaman and Nicobar Islands, also, have assumed importance as secondary sources of oil-production in recent years.

Oilseeds are grown mainly on marginal and sub-marginal lands under low input usage. Area covered under oilseeds occupied 24.5 per cent of the total irrigated area and 13.8 per cent in 2003-04. Oilseeds’ cultivation and output is concentrated in central and southern parts of the country, mainly in Gujarat , Andhra Pradesh, Tamil Nadu, Rajasthan, Madhya Pradesh, and Karnataka.

Area covered under the entire group of 9 oilseeds has increased from 10.73 million hectares in 1950-51 to 25.99 million hectares in 2006-07, registering an average compound annual growth rate (CAGR) of 1.58 per cent during the period of 57 years. While their production has risen from 5.16 million tonnes to 23.26 million tonnes marking an average CAGR of 3.03 per cent, the yield has improved at an average CAGR of 1.43 per cent to 895 kg per hectare from 481 kg per hectare during the same period (Table 1).

A closer look at the trends of area cultivated, production and yield of these oilseeds (Graph A) indicates that the group of oilseeds as a whole did not experience any major development with respect to any of these aspects during first three decades after independence. In fact, the growth rates in terms of area covered, production and productivity decelerated considerably during this period (Table 1). Concentrated efforts made towards boosting the production and productivity of major foodgrains like rice and wheat through various incentives like significant hikes in minimum support price (MSP), provision of assured procurement and distribution channels, marketing infrastructure and technological assistance in the form of improving the quality of different input materials, and allocation of financial resources for research and development, etc., have been some of the important factors that encouraged rice-wheat cropping pattern and thus, indirectly, restrained the growth of other crops; oilseeds being one of them.

Notwithstanding this, ‘All-India Coordinated Project on Oilseeds’ had been launched in 1967 that helped development of different types of high yielding varieties of oilseeds along with production practices suited to various agro-climatic conditions. Only a few major edible oilseeds like mustard, soyabean and sunflower have been genetically modified with emphasis on agronomic traits[1]. However, oilseeds production witnessed a major break-through in 1986, with the central government launching a more comprehensive programme, called ‘Technology Mission on Oilseeds (TMO)’, aiming to provide a thrust to production, processing, marketing, etc. of oilseeds. Besides, in 1989, National Dairy Development Board (NDDB) was assigned a role of market intervention for edible oilseeds and oils for ensuring remunerative prices to farmers, reasonable costs to consumers and attaining of self-sufficiency by government of India (refer to footnote No. 1) Consequently, the growth rates in terms of area cultivated, production and yield recorded sharp increases towards the end of 1980s. This can be observed from CAGR for area, production and yield for the decade 1980-90 standing at 2.4 per cent. 5.5 per cent and 3.0 per cent, respectively. Acceleration in the growth rates continued till late 1990s with the year 1998-99 marking the highest ever levels of production (24.75 million tonnes) as well as that of yield (944 kg per hectare). However, adverse weather conditions (drought witnessed by major oilseeds producing states like Chattisgarh, Madhya Pradesh and Rajasthan) in the successive years hampered the production and productivity of oilseeds, which stood at 14.84 million tonnes and 691 kg per hectare, respectively, in 2002-03.

Nonetheless, the situation reversed completely, with oilseeds regaining their momentum in 2003-04, on account of favourable weather conditions, registering a growth of 10 per cent in area cultivated; a surge of 70 per cent in output and that of 54 per cent in yield over the previous year (Annexure I). Though the rising trends did not continue for each of the successive years, the cyclical pattern that has been observed vis-à-vis area, production and yield helped CAGRs for the period 2000-07 to sustain at levels higher than those attained during earlier decades (Table 1).

At present, improved sowings of oilseeds during kharif season 2007 has indicated better output prospects during this season, which is likely to rise by an impressive 15.7 per cent to around 16 million tonnes, on account of remarkable increase in output of groundnut and soyabean. In fact, soyabean production is expected to touch a new high of 9.04 million tonnes for kharif season of 2007-08.

Edible oilseeds processing consists of three operations: crushing and expelling (separating oil from the solids), solvent extraction (to chemically remove residual oil from the oilcake solids), and oil refining. The ghanis and small-scale expellers, generally, carry out the first operation. While ghanis belong to the small scale industries (SSI) segment and usually serve the rural markets, small scale expellers (which use metal screws to press or expel oil from seeds) are larger than the ghanis, oil expelling capacity being in the range of 5-10 tonnes per day, compared to around 50-60 kilos a day for ghanis. Solvent extractors, engaged at the second stage of processing, belong to the organised segment and are also the second largest after the SSI segment, in the domestic edible oil industry. They use modern technology to process low oil and high meal seeds (for example soyabean, cottonseed) into edible oil and de-oiled cake. Oil refining also belongs to the organised sector and they generally refine both expeller oils and solvent extracted oils. Vanaspati is made by hydrogenation of refined oil to vegetable shortening or spread and is similar to the milk product ghee and absorbs around 10 per cent of the total edible oil supply in India (Table 2).

As stated earlier, production of edible oils is directly proportionate to production and availability of oilseeds. Total edible oil production in the country has risen at a CAGR of 0.4 per cent from 74.7 lakh tonnes in 1995-96 to around 87 lakh tonnes in 2005-06 (Table 3). Though the primary sources, i.e., domestically produced oilseeds, have contributed almost three fourth of the total edible oil production in the country, the uninterrupted and ever increasing demand for edible oils in the domestic market in addition to inconsistent supply of domestically produced oilseeds have made the secondary sources play a critical role in domestic production of edible oils (Table 3).

Among the primary sources rapeseed and mustard oil has the largest share of 34.2 per cent in total edible oil produced in the country in 2005-06, followed by groundnut oil and soyabean oil. While the share of rapeseed and mustard oil has risen slightly from 33.4 per cent recorded in 1995-96, that of groundnut oil has declined over a decade from 31.3 per cent in 1995-96 to 27.5 per cent in 2005-06. On the contrary, the share of soyabean oil has increased from 14.6 per cent to 20.6 per cent during the same decade. Among the secondary sources, rice bran has emerged as the largest contributor to the edible oil production with a share of 30.8 per cent in 2005-06 followed by cottonseed, coconut and solvant extracted oils. Solvent extracted oils, in fact, had the major share (25.8 per cent) among secondary sources in 1995-96. However, over a span of a decade, its contribution has declined to 18.6 per cent. Similarly, coconut oil also has experienced a fall in its share in the total edible oil production from 22.1 per cent in 1995-96 to 19.0 per cent in 2005-06. On the other hand, contribution of cottonseed has improved from 21.0 per cent to 25.8 per cent during the same period (Table 3).

Table 3: Contribution of Primary and Secondary Sources to Total Edible Oil Production: A Decadal Perspective
(lakh tonnes)
	1995-96	1996-97	1997-98	1998-99	1999-00	2000-01	2001-02	2002-03	2003-04	2004-05	2005-06*
A. Primary Sources	55.68	61.57	51.38	59.70	50.15	44.99	50.16	36.24	60.70	60.67	65.01
	{74.6}	{75.8}	{72.8}	{75.0}	{73.6}	{71.4}	{72.2}	{66.1}	{75.3}	{74.9}	{74.6}
Groundnut	17.44	19.87	16.95	20.66	12.09	14.74	16.16	9.48	18.69	15.58	17.84
	(31.3)	(32.3)	(33.0)	(34.6)	(24.1)	(32.8)	(32.2)	(26.2)	(30.8)	(25.7)	(27.4)
	{23.4}	{24.4}	{24.0}	{26.0}	{17.7}	{23.4}	{23.3}	{17.3}	{23.2}	{19.2}	{20.5}
Rapeseed & Mustard	18.60	20.65	14.57	17.56	17.94	12.99	15.76	12.03	19.50	23.54	22.22
	(33.4)	(33.5)	(28.4)	(29.4)	(35.8)	(28.9)	(31.4)	(33.2)	(32.1)	(38.8)	(34.2)
	{24.9}	{25.4}	{20.6}	{22.1}	{26.3}	{20.6}	{22.7}	{21.9}	{24.2}	{29.1}	{25.5}
Soyabean	8.14	8.61	10.34	11.43	11.33	8.45	9.54	7.45	12.51	11.00	13.37
	(14.6)	(14.0)	(20.1)	(19.1)	(22.6)	(18.8)	(19.0)	(20.6)	(20.6)	(18.1)	(20.6)
	{10.9}	{10.6}	{14.7}	{14.4}	{16.6}	{13.4}	{13.7}	{13.6}	{15.5}	{13.6}	{15.3}
Sunflower	4.16	4.13	2.94	3.12	2.29	2.15	2.24	2.88	3.07	3.92	4.73
	(7.5)	(6.7)	(5.7)	(5.2)	(4.6)	(4.8)	(4.5)	(7.9)	(5.1)	(6.5)	(7.3)
	{5.6}	{5.1}	{4.2}	{3.9}	{3.4}	{3.4}	{3.2}	{5.3}	{3.8}	{4.8}	{5.4}
Sesamum	1.64	1.98	1.77	1.63	1.49	1.61	2.16	1.37	2.42	2.09	2.27
	(2.9)	(3.2)	(3.4)	(2.7)	(3.0)	(3.6)	(4.3)	(3.8)	(4.0)	(3.4)	(3.5)
	{2.2}	{2.4}	{2.5}	{2.0}	{2.2}	{2.6}	{3.1}	{2.5}	{3.0}	{2.6}	{2.6}
Nigerseed	0.57	0.45	0.42	0.42	0.44	0.33	0.39	0.26	0.33	0.34	0.21
	(1.0)	(0.7)	(0.8)	(0.7)	(0.9)	(0.7)	(0.8)	(0.7)	(0.5)	(0.6)	(0.3)
	{0.8}	{0.6}	{0.6}	{0.5}	{0.6}	{0.5}	{0.6}	{0.5}	{0.4}	{0.4}	{0.2}
Safflower	1.14	1.35	0.36	0.73	0.78	0.60	0.66	0.54	0.40	0.52	0.57
	(2.0)	(2.2)	(0.7)	(1.2)	(1.6)	(1.3)	(1.3)	(1.5)	(0.7)	(0.9)	(0.9)
	{1.5}	{1.7}	{0.5}	{0.9}	{1.1}	{1.0}	{1.0}	{1.0}	{0.5}	{0.6}	{0.7}
Castor	3.12	3.60	3.32	3.36	3.06	3.52	2.61	1.71	3.19	3.17	3.38
	(5.6)	(5.8)	(6.5)	(5.6)	(6.1)	(7.8)	(5.2)	(4.7)	(5.3)	(5.2)	(5.2)
	{4.2}	{4.4}	{4.7}	{4.2}	{4.5}	{5.6}	{3.8}	{3.1}	{4.0}	{3.9}	{3.9}
Linseed	0.87	0.93	0.72	0.80	0.72	0.60	0.63	0.53	0.59	0.51	0.42
	(1.6)	(1.5)	(1.4)	(1.3)	(1.4)	(1.3)	(1.3)	(1.5)	(1.0)	(0.8)	(0.6)
	{1.2}	{1.1}	{1.0}	{1.0}	{1.1}	{1.0}	{0.9}	{1.0}	{0.7}	{0.6}	{0.5}
B. Secondary Sources	19.00	19.70	19.20	19.90	18.00	18.00	19.30	18.60	19.90	20.30	22.10
	{25.4}	{24.2}	{27.2}	{25.0}	{26.4}	{28.6}	{27.8}	{33.9}	{24.7}	{25.1}	{25.4}
Coconut	4.20	4.50	4.50	4.90	4.50	5.60	5.50	5.50	5.50	5.50	4.20
	(22.1)	(22.8)	(23.4)	(24.6)	(25.0)	(31.1)	(28.5)	(29.6)	(27.6)	(27.1)	(19.0)
	{5.6}	{5.5}	{6.4}	{6.2}	{6.6}	{8.9}	{7.9}	{10.0}	{6.8}	{6.8}	{4.8}
Cottonseed	4.00	4.80	4.20	4.80	5.00	4.60	4.70	4.30	4.30	4.30	5.70
	(21.1)	(24.4)	(21.9)	(24.1)	(27.8)	(25.6)	(24.4)	(23.1)	(21.6)	(21.2)	(25.8)
	{5.4}	{5.9}	{6.0}	{6.0}	{7.3}	{7.3}	{6.8}	{7.8}	{5.3}	{5.3}	{6.5}
Ricebran	4.50	4.60	4.80	5.00	5.00	4.80	5.50	6.00	6.00	6.20	6.80
	(23.7)	(23.4)	(25.0)	(25.1)	(27.8)	(26.7)	(28.5)	(32.3)	(30.2)	(30.5)	(30.8)
	{6.0}	{5.7}	{6.8}	{6.3}	{7.3}	{7.6}	{7.9}	{10.9}	{7.4}	{7.7}	{7.8}
Solvent Extracted Oils	4.90	4.30	4.20	3.70	2.50	2.00	2.80	2.00	3.30	3.50	4.10
	(25.8)	(21.8)	(21.9)	(18.6)	(13.9)	(11.1)	(14.5)	(10.8)	(16.6)	(17.2)	(18.6)
	{6.6}	{5.3}	{6.0}	{4.6}	{3.7}	{3.2}	{4.0}	{3.6}	{4.1}	{4.3}	{4.7}
Tree & Forest Origin	1.40	1.50	1.50	1.50	1.00	1.00	0.80	0.80	0.80	0.80	1.30
	(7.4)	(7.6)	(7.8)	(7.5)	(5.6)	(5.6)	(4.1)	(4.3)	(4.0)	(3.9)	(5.9)
	{1.9}	{1.8}	{2.1}	{1.9}	{1.5}	{1.6}	{1.2}	{1.5}	{1.0}	{1.0}	{1.5}
Total (A+B)	74.68	81.27	70.58	79.60	68.15	62.99	69.46	54.84	80.60	80.97	87.11
Figures in brackets are percentages to total edible oil production
Figures in curly brackets are percentages to the respective sub-group viz primary sources and secondary sources
Source: Agricultural Statistics At a Glance2006-07, Ministry of Agriculture

The slow pace of growth in the production of edible oils in the domestic economy has not been able to meet the domestic demand, which has been escalating continuously due to increased population, growing incomes. Edible oil consumption pattern in the country indicates that varieties of oils used as well as quantity consumed have a regional distribution corresponding to varied culinary tastes and preferences across different states. Though in recent years with the advancements of technology (rendering oils colourless, odourless and tasteless), unconventional oils like palm oil or its liquid fraction (palmolein), soyabean oil, etc. have started gaining preference, mainly due to health concerns. Palm oil (mainly imported) and soybean oil has accounted for almost half of India 's total edible oil consumption in recent years, followed by mustard oil, groundnut oil, cottonseed oil, rice bran oil and sunflowerseed oil.

Per capita consumption of edible oil has definitely been rising over the eleven years from 1993-94 to 2004-05. Table 4 shows the extent of increase to be as much as 30 per cent in rural India and about 18 per cent in urban India . In rural areas, there has been a fall of about 50 gm per person per month in the consumption of groundnut oil, offset by a corresponding rise for mustard oil. In urban India the decline in per capita consumption of groundnut oil is about 80 gm per month, which is more than the rise in mustard oil consumption. In both rural and urban India, per capita consumption of oils like sunflower oil, soyabean oil, other vegetable oil and rice bran oil, taken together has surpassed the consumption of groundnut oil, mustard oil, vanaspati and coconut oil has more than doubled, increasing steadily both before and after 1999-2000. The prevalence of use of groundnut oil among urban households dropped in 2004-05 to 21 per cent, one-half of what it was in 1993-94 (40 per cent). Among rural households the percentage in 2004-05 has reduced to 14 per cent from a 1993-94 level of 30 per cent.

Since there has been a continuous excess of demand over domestic supply of edible oils, import of edible oils has been resorted to for more than two decades to make this item of mass consumption easily available to consumers at reasonable prices. In pursuance of the policy of liberalisation, there have been progressive changes in the import policy in respect of edible oils during the past few years. Edible oil, which was in the negative list of imports, was first decanalised partially in April 1994. This was followed by enlargement of the basket of oils under Open General License (OGL) import in March 1995, subject to 65 per cent of basic custom duty. Subsequently, imports of other edible oils were also placed under OGL, except that of coconut oil. This facilitated easy access to imports of edible oils, resulting in increasing domestic availability of edible oils.

Buoyancy in the edible oil imports has been observed in late 1990s in spite of good harvests of oilseeds in the country, due to increasing demand in the domestic economy. However, this wasn’t the only reason for this resilience in the imports. Declining edible oil production for the three years, during 1999-2000 to 2002-03, on account of huge fall in the domestic edible oilseeds production, resulted in increasing dependence on their imports. Imports as a percentage of net domestic availability surged from 27.4 per cent in 1998-99 to 41.1 per cent in 1999-2000 and further to 48.3 per cent in 2002-03 (Table 5). This resulted in increasing burden on foreign exchequer of the country as imports of edible oil increased from Rs 7,589 crore in 1998-99 to Rs 11,683 crore in 2003-04. However, the sharp improvement in domestic production of oilseeds and therefore of the edible oil output in the following years have helped to moderate the extent of dependence of the country on the imported oils during 2002-03 to 2004-05.

Table 5: Snapshot of Edible Oils Status and India 's Dependence on Imports of Edible Oils
(lakh tonnes)
	Production	Exports and Industrial Use	Net Domestic Availability (2)-(3)	Imports	Actual Consumption (4)+(5)	Import Dependence (5)/(6)
(1)	(2)	(3)	(4)	(5)	(6)	(7)
1995-96	74.7	10.0	64.7	11.6	76.3	15.2
1996-97	81.3	10.0	71.3	14.1	85.3	16.5
	(8.8)	(0.0)	(10.2)	(21.1)	(11.8)
1997-98	70.6	10.0	60.6	12.7	73.2	17.3
	(-13.2)	(0.0)	(-15.0)	(-10.0)	(-14.2)
1998-99	79.6	10.0	69.6	26.2	95.8	27.4
	(12.8)	(0.0)	(14.9)	(107.1)	(30.8)
1999-2000	68.2	8.0	60.2	42.0	102.1	41.1
	(-14.4)	(-20.0)	(-13.6)	(60.0)	(6.6)
2000-01	63.0	8.0	55.0	41.8	96.8	43.2
	(-7.6)	(0.0)	(-8.6)	(-0.5)	(-5.2)
2001-02	69.5	8.0	61.5	43.2	104.7	41.3
	(10.3)	(0.0)	(11.8)	(3.5)	(8.2)
2002-03	54.8	8.2	46.6	43.7	90.3	48.3
	(-21.0)	(2.5)	(-24.1)	(1.0)	(-13.7)
2003-04	80.6	9.2	71.4	52.9	124.3	42.6
	(47.0)	(12.2)	(53.1)	(21.2)	(37.7)
2004-05	81.0	8.5	72.5	45.4	117.9	38.5
	(0.5)	(-7.6)	(1.5)	(-14.1)	(-5.2)
2005-06*	87.1	8.0	79.1	41.8	120.9	34.5
	(7.6)	(-5.9)	(9.2)	(-8.1)	(2.5)
* 3rd Advance Estimates (released on 05-05-2006); Figure in the brackets are growth rates over the previous year.
Source: Agricultural Statistics At A Glance 2006-07, Ministry of Agriculture

Free imports (since 1994) have further lowered the entry barrier to the industry as crude or refined oil can be imported, packed and distributed doing away with the need of having manufacturing facility in the domestic market. However, in order to avoid large imports of edible oils to the extent possible and to harmonise the interests of domestic oilseeds growers, consumers and processors, duty structures on imports have been reviewed from time to time (Annexure II).

A glance at the composition of imports (Table 6) reveals that palm oil and its products have accounted for over 65 per cent of total edible oil imports in 2001-02, which has reduced to 58 per cent in 2005-06 to. On the other hand, share of soft oils has risen from 33.8 per cent to around 42 per cent during the same period. According to statistics provided by the Solvent Extractions Association of India (SEA), total imports of edible oil during November–September, 2006-07 (11 months), has augmented by 11 per cent to 4.2 lakh tonnes compared to 3.8 lakh tonnes in the same period last year on account of lower domestic oilseeds production witnessed in 2006-07 (Table 6).

Crude palm oil (CPO) import has jumped to 2.6 lakh tonnes from around 2 lakh tonnes during the same period, due to reduction of import-duty on CPO from 80 per cent to 45 per cent at present. Similarly import of sunflower oil is more than doubled due to reduction of duty from 75 per cent to 40 per cent. Palm oil products’ (CPO, RBD palmolein, crude palmolein and crude palm kernel oil) import share has further increased to 2.8 lakh tonnes (66 per cent) from 2.2 lakh tonnes (57 per cent), while soft oil import has reduced to 1.4 lakh tonnes (34 per cent) from 1.6 lakh tonnes (43 per cent) during November 2006 to September 2007 compared to the same period of last year. Within soft oil, crude soybean oil import reduced to 1.2 lakh tonnes from 1.5 lakh tonnes due to disparity compared to CPO, while sunflower oil import has increased to 192,795 tonnes from 90,843 tonnes.

Table 6: Import Trend of Edible Oils
	(Tonnes)
Oil Year (November-October)	Palm Oil				Soft Oil						Total
		Crude		Crude	Soyabean	Sunflower	Coconut	Refined	Canola/	Refined
	RBD	Palm	Crude	Palm	Oil	Oil	Oil	Soybean	Rape	Sunflower
	Palmolein	Oil	Olein	Ker.Oil	(degummed)			Oil	Oil	Oil
2001-02	118,895	1,891,538	920,015		2,800	1,475,531	2,504	3,499	10,400		4,425,182
2002-03	319,379	2,151,294	1,261,568	77,650	94,600	1,167,723	7,701	28,994	5,540		5,114,449
2003-04	796,846	2,059,579	491,943	64,349	75,822	890,695	2,029	15,324			4,396,587
2004-05	422,735	2,360,573	186,684	32,558	5,018	2,001,745	7,291	25,003			5,041,607
2005-06	113,491	2,372,681	55,804	26,840	100,843	1,703,360	22,307	20,457		1,050	4,416,833
Nov-Sept 2005-066	106,992	1,982,418	51,807	24,331	1,480,907	90,843	21,307	20,457		1,050	3,780,112
Nov-Sept 2006-07	102,502	2,624,632	39,747	8,922	1,225,010	192,795	10,996	9,120			4,213,724
Source: Solvent Extractors' Association of India

World production of edible oils has grown at a compound annual growth rate (CAGR) of 6.1 per cent between 2001-02 and 2006-07. Consumption of edible oil, during the same period, has risen at a CAGR of 5.9 per cent. Imports have increased even faster at a CAGR of 7.9 per cent and are likely to continue their upward trend to reach in the future as well (Table 7).

India

is one of the largest edible oil producing countries in the world. As per the ‘Oilseeds: world Markets and Trade (October 2007)’, a publication of United States Department of Agriculture (USDA), India has been 7^th largest edible oil producer having a share of around 5.4 per cent in the international market in 2006-07. The country has also been the 3^rd largest consumer as well as importer of vegetable oils, accounting for 10.3 per cent of world edible oil consumption and 12.1 per cent of world edible oil imports in 2006-07.

The Indian edible oil industry has to be contended with increasing competition from imports, the rising cost of oil seeds and the expanding demand-supply gap. Since the production of oil seeds is heavily dependent on monsoon, around 40 per cent of the demand for edible oils within the country has to be met by imports that may have to continue. A policy framework aiming towards improving the capacity utilisation of all the oilseeds processing units, encouraging research and development to upgrade the oilseeds having higher productivity and provision of various fiscal benefits to farmers to undertake increasing cultivation oilseeds, is what the minimum need at the current moment.

Annexure I: Oilseeds Scenario
Year	Area	Production	Yield	Area		Production		Yield
Year	Million Hectares	Million Tonnes	Kg. per Hectare	Annual Variation in Per cent
1950-51	10.73	5.16	481
1951-52	11.69	5.03	430	8.9	-2.5		-10.6
1952-53	11.18	4.73	424	-4.4	-6.0		-1.4
1953-54	10.99	5.37	488	-1.7	13.5		15.1
1954-55	12.52	6.40	511	13.9	19.2		4.7
1955-56	12.09	5.73	474	-3.4	-10.5		-7.2
1956-57	12.49	6.36	509	3.3	11.0		7.4
1957-58	12.66	6.35	502	1.4	-0.2		-1.4
1958-59	13.00	7.30	561	2.7	15.0		11.8
1959-60	13.95	6.56	470	7.3	-10.1		-16.2
1960-61	13.77	6.98	507	-1.3	6.4		7.9
1961-62	14.77	7.28	493	7.3	4.3		-2.8
1962-63	15.34	7.39	482	3.9	1.5		-2.2
1963-64	14.82	7.13	481	-3.4	-3.5		-0.2
1964-65	15.26	8.56	561	3.0	20.1		16.6
1965-66	15.25	6.40	419	-0.1	-25.2		-25.3
1966-67	15.00	6.43	428	-1.6	0.5		2.1
1967-68	15.67	8.30	530	4.5	29.1		23.8
1968-69	14.47	6.85	473	-7.7	-17.5		-10.8
1969-70	14.81	7.73	522	2.3	12.8		10.4
1970-71	16.64	9.63	579	12.4	24.6		10.9
1971-72	17.27	9.08	526	3.8	-5.7		-9.2
1972-73	15.79	7.14	452	-8.6	-21.4		-14.1
1973-74	16.90	9.39	555	7.0	31.5		22.8
1974-75	17.31	9.15	529	2.4	-2.6		-4.7
1975-76	16.92	10.61	627	-2.3	16.0		18.5
1976-77	16.47	8.43	512	-2.7	-20.5		-18.3
1977-78	17.17	9.66	563	4.3	14.6		10.0
1978-79	17.71	10.10	570	3.1	4.6		1.2
1979-80	16.94	8.74	516	-4.3	-13.5		-9.5
1980-81	17.60	9.37	532	3.9	7.2		3.1
1981-82	18.91	12.08	639	7.4	28.9		20.1
1982-83	17.76	10.00	563	-6.1	-17.2		-11.9
1983-84	18.69	12.69	679	5.2	26.9		20.6
1984-85	18.92	12.95	684	1.2	2.0		0.7
1985-86	19.02	10.83	570	0.5	-16.4		-16.7
1986-87	18.63	11.27	605	-2.1	4.1		6.1
1987-88	20.13	12.65	629	8.1	12.2		4.0
1988-89	21.90	18.03	824	8.8	42.5		31.0
1989-90	22.80	16.92	742	4.1	-6.2		-10.0
1990-91	24.15	18.61	771	5.9	10.0		3.9
1991-92	25.89	18.60	719	7.2	-0.1		-6.7
1992-93	25.24	20.11	797	-2.5	8.1		10.8
1993-94	26.90	21.50	799	6.6	6.9		0.3
1994-95	25.30	21.34	843	-5.9	-0.7		5.5
1995-96	25.96	22.11	851	2.6	3.6		0.9
1996-97	26.34	24.38	926	1.5	10.3		8.8
1997-98	26.12	21.32	816	-0.8	-12.6		-11.9
1998-99	26.23	24.75	944	0.4	16.1		15.7
1999-00	24.28	20.72	853	-7.4	-16.3		-9.6
2000-01	22.77	18.44	810	-6.2	-11.0		-5.0
2001-02	22.64	20.66	913	-0.6	12.0		12.7
2002-03	21.49	14.84	691	-5.1	-28.2		-24.3
2003-04	23.66	25.19	1064	10.1	69.7		54.0
2004-05	27.52	24.35	885	16.3	-3.3		-16.8
2005-06	27.86	27.98	1004	1.2	14.9		13.4
2006-07*	25.99	23.26	895	-6.7	-16.9		-10.9
* Advance Estimates as on 04.04.2007 Note: 1. The yield rates given above have been worked out on the basis of production & area figures taken in '000 units. 2. Data for 1950-51 to 1969-70 relate to total of five major oilseeds viz. groundnut, castorseed, sesamum, rapeseed & mustard and linseed.
Source: Agricultural Statistics At A Glance 2006-07, Ministry of Agriculture

Annexure II: Import Duty Structure on Edible Oils
April, 1994	Import of RBD Palmolein placed on OGL with 65 per cent import duty.
March, 1995	Import of all edible oils (except coconut oil, palm kernel oil, RBD palm oil, RBD palm stearin) placed on OGL with 30 per cent import duty.
1996-97 (In regular Budget)	Further reduction in import duty to 20 per cent +2 per cent (special duty of customs) bringing total import duty to 22 per cent.
1996-97 (In regular Budget)	Another special duty of custom @ 3 per cent was later imposed bringing the total import duty to 25 per cent.
July, 1998	Import duty further reduced to 15 per cent.
1999-2000 (Budget)	Import duty raised to 15 per cent (basic) + 10 per cent (surcharge)=16.5 per cent.
December, 1999	Import duty on refined oils raised to 25 per cent (basic) + 10 per cent (surcharge) = 27.5 per cent. In addition, 4 per cent SAD levied on refined oils.
June, 2000	Import duty on crude oils raised to 25 per cent (basic) + 10 per cent surcharge)=27.5 per cent and on refined oils raised to 35 per cent (basic)+10 per cent (surcharge)+4 per cent (SAD)=44.04 per cent. Import duty on Crude Palm Oil (CPO) for manufacture of vanaspati retained at 15 per cent (basic) + 10 per cent (surcharge)=16.5 per cent.
November, 2000	Import duty on CPO for manufacture of vanaspati raised to 25 per cent and on crude vegetable oils raised to 35 per cent. Import duty on CPO for other than vanaspati manufacture raised to 55 per cent. Import duty on refined vegetable oils raised to 45 per cent (basic)+4 per cent (SAD)=50.8 per cent. Import duty on refined palm oil and RBD palmolein raised to 65 per cent (basic)+4 per cent (SAD)=71.6 per cent.
March, 2001 (As amended on 26.4.2001)	Import duty on crude oils for manufacture of vanaspati/refined oils by the importers registered with Directorate of VVO&F raised to 75 per cent (for others import duty levied at 85 per cent) except soyabean oil, rapeseed oil and CPO at 45 per cent, 75 per cent and 75 per cent respectively. The duty on refined oils including RBD Palmolein raised to 85 per cent (basic) except in the cases of Soyabean Oil and Mustard oil where the duty is placed at 45 per cent(basic) and 75 per cent(basic) respectively due to WTO binding. In addition, 4 per cent SAD levied on refined oils.
October, 2001	Import duty on Crude Palm Oil and its fractions, of edible grade, in loose or bulk form reduced from 75 per cent to 65 per cent.
November, 2001	Import duty on crude sunflower oil or safflower oil reduced to 50 per cent up to an aggregate of 1,50,000 tonnes (Tariff Rate Quota) of total imports of such goods in a financial year subject to certain condition. Import duty on refined rape, colza or mustard oil reduced to 45 per cent unto an aggregate of 1,50,000 tonnes (Tariff Rate Quota) of total imports of such goods in a financial year subject to certain condition.
March, 2002	Status quo on import duty structure of vegetable oils/edible oils maintained. Import of vanaspati from Nepal be levied SAD @ 4 per cent.
August, 2002	SAD is not applicable on vanaspati imported from Nepal under TRQ.
March, 2003	Statuesque on import duty structure of vegetable oils/edible oils maintained.
April, 2003	Import duty on Refined Palm Oil and RBD Palmolein reduced from 85 per cent to 70 per cent and SAD not applicable on edible oils.
July, 2004	Import duty on Refined Palm Oil and RBD Palmolein raised from 70 per cent to 75 per cent
February, 2005	Import duty on Crude Palm Oil / Crude Palmolein raised from 65 per cent to 80 per cent and Import duty on Refined Palm Oil / RBD Palmolein raised from 75 per cent to 90 per cent
2006-2007 (Budget)	With effect from 1.3.2006, edible oils attract a special additional duty of Customs @ 4 per cent and Import Duty on Vanaspati and similar products raised from 30 per cent to 80 per cent.
August, 2006	With effect from 8.8.2006, special additional duty of customs not applicable on vanaspati imported from Nepal w.e.f. 11.8.2006, import duty on Crude Palm oil/Crude Palmolein reduced from 80 per cent to 70 per cent and import duty on refined Palm Oil/RBD Palmolein reduced from 90 per cent to 80 per cent.
January,2007	W.e.f. 24.1.2007, import duty on Crude Palm Oil /Crude Palmolein reduced from 70 per cent to 60 per cent, import duty on refined Palm Oil/RBD Palmolein reduced from 80 per cent to 67.5 per cent, import duty on Crude Sunflower oil reduced from 75 per cent to 65 per cent and import duty on refined Sunflower oil reduced from 85 per centto75 per cent.
2007-08 (Budget)	With effect from 1.3.2007, import duty on Crude Sunflower Oil has been reduced from 65 per cent to 50 per cent and import duty on refined Sunflower Oil and other Oils has been reduced from 75 per cent to 60 per cent. Further edible oils (except Soybean oil, rapeseed oil and mustard oil) will attract education cess of 3 per cent of the aggregate of customs duty. With effect form 1.3.2007, all edible oils will not attract Special Additional Duty of customs @ 4 per cent/
April, 2007	With effect from 13-04-2007 import duty on Crude Palm Oil /Crude Palmolein has been reduced from 60 per cent to 50 per cent and import duty on refined Palm Oil /RBD Palmolein has been reduced from 67.5 per cent to 57.5 per cent
Source: The Directorate of Vanaspati, Vegetable Oils and Fats, Ministry of Public Distribution

[1] Mruthyunjaya, et al (2005), ‘Efficiency in Indian Edible Oilseed Sector: Analysis and Implications’, Economics Research Review, Jul –Sept

The central government has declared a minimum support price (MSP) of Rs 1,000 per quintal for the 2007-08 wheat crop that would be marketed in the rabi season April 2008-09, increasing it from Rs 850 per quintal paid last year. Minimum support price (MSP) of wheat has been raised by 18 per cent to stimulate farmers to sow more. In addition to it, final procurement price for common varieties of paddy would be Rs 695 per quintal (MSP of Rs 645 plus bonus of Rs 50) and that for Grade ‘A’ paddy it would be Rs 725 per quintal (MSP of Rs 675 plus bonus of Rs 50).r. After factoring the price with last year’s price the effective increase has come to Rs 75 per quintal, marking one of the largest jumps for any crop year. Meanwhile, the country exported around 3.5 million tonnes of non-basmati rice valued at almost US $1 billion in 2006-07. At present non-basmati varieties are fetching about US $300 per tonne free on board, higher tan the domestic price level. Hence, the central government has banned exports of non-basmati grades of rice to ensure sufficient grains procurement for the central pool and this would make an immediate effect on local supplies as demand for grain increases gradually. Moreover, Cabinet Committee on Economic Affairs (CCEA) has also approved minimum support price (MSP) for other rabi crops for the season 2007-08, underwhcih MSP for rapeseed-mustard would be Rs 1,800 per quintal as against that of Rs 1,715 in 2006-07, while that of safflower would be Rs 1,650 as against that of Rs 1,565 to its corresponding period, for gram, it would stand at Rs 1,600 as compared to that of Rs 1,445 last year, for masur at Rs 1,700 as contrasted to that of Rs 1,545 a year ago and Rs 650 for barley as compared to that of Rs 565 during last year.

As per Food Corporation of India (FCI), country has 10.12 million tonnes of the grain in the warehouses as of October 01, 2007 which is expected to meet demand untill July 2008 and reducing the pressure to purchase more of grain from overseas. While, stockpiles of rice have been 5.48 million tones during the same period as compared with the mandatory requirement of 5.2 million tonnes.

According to Food and Agriculture Organisation (FAO) country’s cereal production is likely to rise by 3.08 per cent, due to increase in grains output in all states. Total cereal output in the country is projected to increase to 247.9 million tonnes from 240.5 million tonnes in the previous year. It is estimated that paddy output in marketing period 2007 would account to 140 million tonnes, which is close to last year’s harvested crop of 139.1 million tonnes. While, wheat crop harvested in May 2007 has risen to 73.5 million tonnes as against that of earlier estimation of 69.4 million tonnes, as a result it is expected that country’s wheat imports in 2007-08 would be reduced significantly.

The central government owned trading firm State Trading Corporation (STC) has invited bids for sale of 7,200 tonnes of imported pulses before October 15,2007. It is projected that all the four public sector firms STC, Mumbai Minerals Trading Corporation (MMTC), Project Equipment Commodities (PEC) and National Agricultural Cooperative Marketing Federation of India (NAFED), together, would have offered to sell over 1.7 lakh tonnes of various pulses during September 2007, while, STC alone had planned to sell around 4,000 tonnes of urad, 3,000 tonnes of green moong and 2,00 tonnes of Arhar.

According to Solvent Extractor’s Association, total oilmeal exports during first half of the fiscal year (April-September 2007-08) has declined radically by 12 per cent at 1, 432,425 tonnes as against that of 1,633,475 tonnes in the same period a year ago. This drop was attributed due to drastic decline in the exports of soybean meal from 975,975 tonnes to 775,275 tonnes, rapeseed meal from 451,075 tonnes to 390,050 tonnes and groundnut meal from 48,100 tonnes to 12,275 tonnes. In contrast, castor meal exports has risen to 163,350 tonnes from 63,575 tonnes. Oilseeds production, during the current oil year (November 2006-October 2007), is estimated to have declined to 226.7 lakh tonnes (lt) from 239.7 lakh tonnes (lt) in the previous year. As per the industry, it is expected that in the upcoming year, production would rise to 250 lakh tonnes.

Spices Board has submitted proposal to the central government, in the plight of vanilla farmers in the country, which would support them by providing subsidy to ice-cream manufacturers in the co-operative and public sectors for using natural vanilla. If this scheme gets approval, then it would be three-year plan underwhcih subsidy would be provided of Rs 5 crore yearly and would allow to absorb nearly 200 tonnes of natural vanilla beans by the ice cream manufacturers. In addition to it, imported synthetic vanilla would be labeled mandatory, so that there would be increase in domestic consumption.

Domestic starch manufacturers and poultry industry have invoiced their concern over the exports of maize, as it would lead to shortage with in the country because demand from poultry industry is rising gradually by 17 per cent and starch industrial demand is expected to rise at 2.4 million tonnes as compared to 1.45 million tonnes last year. It is estimated that nearly 13 million tonnes of maize would be cultivated in the current season as against that of 11 million tonnes last year, while annual consumption would be around 14 to15 million tonnes.

National Agricultural Cooperative Marketing Federation of India (NAFED), Mother Dairy, Kendriya Bhandar and Delhi government’s food and supplies Department would sell onions at a price between Rs 17 and 18 per kg to keep price under control, as prices were rising radically causing hardship for a common man.

The state government of Maharashtra , in association with Confederation of Indian Textile Industry (CITI) and Cotton Development Research Association (CDRA), has launched a scheme of contract farming in 342 villages of Buldhana district of the suicides ravaged vidharbha region. This scheme will cover nearly 14,613 cotton growers with about 50,000 acres of sowing area and purchasers of cotton. The main aspect of the scheme is the price risk sharing accompanied by grant of price premium. Under this scheme CITI-CDRA would play a direct role by supplying valuable information on improved and scientific cultivation practices and by providing timely tips on pest control. The district administrator would monitor the supply of genuine inputs such as seeds, fertilisers and pesticides through reliable trade channels.

According to International Sugar Organisation (ISO), it is expected that India would have an exportable sugar surplus of 11.5 million tonnes in 2007-08, from which massive surplus of 6.95 million tonnes are expected to go to building up of stocks. It is predicted that sugar surplus would keep prices under control.

Cabinet Committee on Economic Affairs (CCEA) on October 9, 2007, has granted approval to make 10 per cent blending of ethanol with petrol optional for October 2007 and this blending would be mandatory from October 2008. The government would also introduce a uniform purchase price of Rs 21.50 per litre ex-factory for supply of ethanol which would be implemented all over the country for the next three years except in Jammu & Kashmir, North East and Island Territories, prior to it central government had made five per cent blending of ethanol with petrol mandatory across the country expect in Jammu & Kashmir, North East and Island Territories

Praj Industries Ltd (PIL) is setting up a commercial scale plant for ethanol production exclusively from sweet sorghum at Nanded for Tata Chemicals Ltd. It is projected to start functioning from the middle of 2008. This plant would have a crushing capacity of 900 tonnes of sweet sorghum stalks and would produce 30,000 litres of ethanol per day and it would generate its own power from bagasse generated from the milled stocks. Tata Chemicals has dedicated area of 4,000 hectares of land for the cultivation of sweet sorghum.

As per the Tea Board, due to bad weather conditions in the state of Assam and Kerala, production of tea has got affected adversely. . It has been projected that during January-August 2007-08, tea production in Assam would have dropped to 290.1 million kg (mkg) as compared to that of 294.1 million kg (mkg) in the same period a year ago, while in Kerala it would have declined to 39.8 million kg (mkg) as against that of 44.7 million kg (mkg) in the corresponding period. Production in Tamil Nadu has witnessed a marginal rise, while it has remained stagnant in Karnataka. It has been estimated that total tea production in the country during January-August 2007-08 would be 576.1 million kg (mkg) as against that of 582.3 million kg (mkg) during the same period last year, while overall exports of tea has fallen down by 19.41 million kg (mkg) at 103.90 million kg (mkg) as compared to that of 122.50 million kg (mkg) in the same corresponding period a year ago.

As per Coffee Board of India, coffee exports during January 01-October 09 2007, have been 182,744 tonnes, down by 11 per cent compared to the same period a year ago, due to overall slack demand from overseas buyers, rates quoted by Indian exporters being higher than international prices and appreciation of rupee against the US dollar. This has eroded the profitability of the exporters. During the period January 1-October 9 2007, exports of Arabica variety have declined by 31 per cent to 36,911 tonnes as against that of 53,659 tonnes in the same period last year, while that of Robusta have fallen by 12 per cent to 94,646 tonnes from 1,07,869 tonnes.

As per the Rubber Board, Production of Rubber during the first quarter of the current financial year declined to 1.44 lakh tonnes as against that of 1.69 lakh tonnes during the same period a year ago, recording a decline of 14.8 per cent. This drop has taken place due to adverse weather conditions and the viral fever (chikungunya) that had affected the workers, especially in rubber producing areas In spite of this fall in production, rubber prices for ribbed smoked sheet IV grade are ruling firmly at Rs 90 per kg due to continuous demand for consumption.

According to Rubber Board, total exports of rubber have declined to 16,215 tonnes during April – September 2007 as against that of 47,721 tonnes during corresponding period last year, while natural rubber exports has dropped by nearly 67 per cent in the same period. Domestic demand for rubber in April -September has stood at 416,800 tonnes, up by 3.2 per cent as compared with the same period last year, while production has registered a fall of 16 per cent. Exports targeted for the entire financial year 2007-08 has been 70,000 tonnes but it appears unattainable due to a bunch of reasons; some of them are the non-availability of exportable surplus the narrow gap between domestic and overseas prices, on-going rupee appreciation and increase in domestic consumption. While, market experts have predicted that there might be additional exports of 5000-6000 tonnes in the remaining months of the current financial year.

The Madurai District Milk Producers Cooperative Union in Madurai would establish a mega dairy unit, capable of handling 5 lakh litres of milk by 2010, funded partly by banks and own resources of the Madurai District Milk Producers Cooperative Union, also known as Aavin. The new dairy unit would be established on 40-acre premises of the existing unit at a cost of Rs 70 crore. While the sale of Aavin milk has touched an all-time high of nearly 2 lakh litres by the middle of September 2007, milk production, too, has increased sharply to a high of 2.73 lakh litres due to which the central government also has earned its highest-ever profit of Rs 4.14 crore, largely through increased sales.

The Mangalore based Karnataka Cashew Manufacturers Association (KCMA) has sent a proposal to Karnataka government urging to remove cashew fenny from state excise purview and allowing farmers to produce fenny directly because the state produce nearly 5 lakh tonnes of cashew apple out of which fenny is produced annually and put into no use. While Goa is the only state in the country where cashew fenny production is legally permitted.

National Bank for Agriculture and Rural Development (Nabard) has decided to set up a separate cell to focus on rural services sector. The services covered would include rural sanitation, preparation of bankable projects, low-cost rural housing, malls for marketing of rural products and low-cost eco-tourism for rural employment. Moreover, for the setting up of the cell, NABARD would be utilising some amount from its Microfinance Development Equity Fund, the corpus of which has been, currently, pegged at Rs 140 crore and it is going to be improved in the near future.

Industry

Index of Industrial Production with base 1993-94 for the month of August 2007 rose by 10.7 per cent as compared 10.3 during August 2006. Average index for the fiscal so far registered an increase of 9.8 per cent as against 11.0 per cent last year. While the growth of manufacturing sector is marginally less at 10.4 per cent as compared to that in August at 11.9 per cent, it is the growth in Mining sector (17.1 per cent against a decline of 2.7 per cent) and electricity city whose rate of growth at 9.2 per cent during August 2007 more than double to that in August 2006 at 4.1 per cent.

Infrastructure

The cumulative index of 6 core industries having a weight of 26.7 per cent in the Index of Industrial Production (1993-94 = 100) registered a better annual growth of 9.0 per cent in August 2007 as compared to a lower growth of 6.6 per cent in August 2006 mainly because of substantial increase in the production of coal.

However, during the first five month of the current fiscal year the growth rate at 6.4 per cent was less than that of 8.3 per cent recorded during the comparable period of last fiscal 2006-07.

Crude petroleum production registered a growth of 1.0 per cent as compared to 3.1 per cent

Refinery products grew by 10.4 per cent during April-August 2007 as compared to 12.2 per cent during the same period last year.

Though coal production during August 2007 recorded almost 100 per cent growth as compared to August 2006, the rate of fiscal year so far growth was only 1.3 per cent as compared to 6.6 per cent last year.

Generation of electricity registered a faster growth of 8.2 per cent during the review period as against a growth of 5.8 per cent last year.

Cement production grew by 8.9 per cent during April-August 2007-08 compred to an increase of 9.5 per cent during the same period of 2006-07.

Finished carbon steel production rose by 5.9 per cent during the review period as against a larger growth of 12.5 per cent last year.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) declined to 3.26 percent for the week ended September 22,2007. During the comparable week of the earlier year, it was 5.41 per cent.

During the week under review, the WPI rose by 0.1 per cent to 215.1 from 215.0 at the previous weeks’ level (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), rose by 0.1 percent to 226.4 from its previous week’s level of 226.2, mainly due to rise in prices of ragi, eggs, etc.

The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) remained stationary at 322.0.

The index of ‘manufactured products’ group (weight 63.75 per cent) rose by 0.1 per cent to 187.4 from 187.2 for the previous week Food products group rose by 1.o per cent to 189.3 from 189.2.4 for the previous week due to higher prices of gur, soyanbean oil etc.

The latest final index of WPI for the week ended August 04,2007 has undergone upward revision; as a result, both the absolute index and the implied inflation rate stood at 213.8 and 4.39 per cent as against the provisional data of 213.1 and 4.05 per cent.

The centre government has given its in-principle approval to the State Bank of India to raise Rs 10,000 crore from the market by March 2008. However, the government said it was yet to learn the route the public sector bank is taking to raise the capital; whether it is via a rights issue or by offering shares to the public.

To enable resident individuals to manage and hedge foreign exchange exposures arising out of any remittances, RBI has permitted forward contracts without any underlying documents. The limit, however, has been capped at $100,000. The contracts booked under this facility would normally be on a deliverable basis but incase of any cash-flow mismatches, the contracts booked under this facility can be cancelled and re-booked again. The notional value of the outstanding contracts, however, should not exceed $100,000 at any time. The RBI has also specified the maximum tenor of one year for such contracts. In order to provide greater flexibility to the SME sector and resident individuals, the RBI has also liberalized the scope and range of forward contracts to facilitate hedging of foreign currency exposures.

The country’s second largest bank, the private sector ICICI Bank, is going in for a massive expansion of its branch and ATM network. The bank has received permission from the RBI for over 400 branches and 2,500 ATMs. This is one of the largest expansions planned by any bank of late.

Public Finance

During April-September 2007, customs and excise duty revenue has risen by a mere 10.8 per cent totalling to Rs 1,03,134 crore as compared with Rs 93,108 crore during the corresponding period of the previous year. Customs duty collections have augmented by 16.1 per cent to Rs 48,480 crore during the period over a year ago. Whereas excise duty collections have improved marginally by 6.5 per cent to Rs 54,654 crore in April-September 2007 as compared with Rs 51,334 crore in the same period last year. Meanwhile, service tax collections till August 2007 grew at a steady 35.4 per cent amounting to Rs 16,867 crore as compared with Rs 12,459 crore during the same period previous year. According to Budget estimates, customs duty receipts are expected to rise 20 per cent to Rs 77,066 crore during 2007-08 while excise revenue is expected to increase by 6.3 per cent to Rs 1,19,000 crore. However the half yearly collection trends reveal that while the government would reach its budget estimates (BE) for customs duty collections, it may fall short once again on the BE for excise duty collections. Low excise duty collections have remained a cause of concern for the government and point towards revenue leakages. The CBEC plans to prevent such revenue leakage by more frequent audits.

Financial Sector

Rathi Bars Ltd, manufacturer of cold twisted deformed (CTD) bars and thermo-mechanically treated (TMT) bars, is to tap the capital market with 71.43 lakh shares with face value of Rs 10 issued at a price of Rs 35 each to raise around Rs 25 crore to fund the expansion programme of manufacturing facility through an initial public offer between October 18 and October 23.

Shriram EPC Ltd, an associate of Chennai-based Shriram Group, has filed draft red herring prospectus with the Sebi for its initial public offering of 50 lakh equity shares of Rs 10 each at a price, which is to be decided through a 100 per cent book-building process. The issue will constitute 11.66 per cent of the fully diluted post-issue paid-up capital of the company. The company plans to primarily invest the proceeds of the issue in its subsidiary and associate companies and fund purchases of plant and equipment for pipe rehabilitation projects. The equity shares will be listed on the NSE and BSE.

Dhanus Technologies Ltd, which entered the capital market on September 10 with a public issue of 38.35 lakh equity shares of Rs 10 each, has fixed its public issue price at Rs 295 per equity share of Rs 10 each. The issue closed on September 12 and subscribed 28.29 times.

In mid-November Oil India Ltd (OIL) may submit the draft red herring prospectus, for its proposed IPO, for Sebi clearance. The company is expecting the issue to be opened in February. The IPO is expected to generate resources to the tune of Rs 1,430 crore for OIL; the government may raise an identical sum through the disinvestments.

The BSE sensex registered 645.7 points gains (3.6 per cent) to close at 18,419 points on the week ended October 12, 2007. The Nifty on the other hand gained 4.6 per cent to touch 5428 points. Strong foreign investment flows and stable markets across the globe were the main driving factors. Expectations of good second quarter results too contributed to the rally.

Among the sectoral indices of BSE, Capital Goods recorded the highest gains of 5.54 per cent as L&T and Bhel pushed up the index. Metal index too recorded 5.09 per cent gain over a week. IT sector was the biggest loser following the moderate infosys third quarterly results.

The capital markets regulator, Securities and Exchange Board of India (Sebi), has decided to ease rules for qualified institutional placements (QIPs) to facilitate companies mobilising resources in a much faster and cost-efficient manner on October 2008. The primary market advisory committee of Sebi cleared a package of proposals to ease issuances of QIPs. These new rules are expected to come into effect by the end of the month after the board formally approves the proposals.

Sebi has brought investment advisors under its direct regulatory purview who sells equity or equity-linked products to investors. According to the proposed regulations issued on October 10, 2007 investment advisors have to disclose commissions and rewards they earn on the products to the investors and made it mandatory for all investment advisors of securities to get themselves registered with the regulator.

Germany ’s Deutsche B (DB), which owns a 5 per cent equity stake in the BSE, has been made an exclusive worldwide sales partner for all indices of the Indian bourse. The move opens up prospective trading interest for the domestic indices in European and other Asian markets. The BSE, which is Asia ’s oldest stock exchange, is yet to attract investors’ fancy in derivatives trading in its indices, and the move is aimed to attract more investor interest in its indices, especially from among foreign investors.

Despite the correction, the Nifty closed at exalted levels of 5428 in the spot market. The October Nifty future settled at 5440.9, while the November at 5440 and December at 5434. Open interest decreased 2.8 lakhs in the October contract; it increased by five lakhs in the November contract. The FIIs hold the key to this market with about 36 per cent of overall open interest. Until Friday, they had continued to increase F&O exposure but the composition of instruments (futures to options and stocks to index) has not changed much. In other indices, there is no liquidity in anything but the October contracts. The Nifty Junior closed above 10,000 in spot, at 10,020. The future was held at 10,016. The CNXIT and Bank Nifty both look bearish and they closed at 4878 and 7934 respectively and in the futures market, the October contracts traded at 4859 and 7946.7 respectively. In the Nifty options market, open interest has expanded across all three settlements and in both calls and puts. The put-call ratio has improved to 1.36 from last week's levels of 1.2. This suggests that despite everything, the market is not due for a major correction yet. Intra-day volatility has jumped in terms of both high-low range as well as sudden trend reversals. This means premiums are liable to climb further despite the expiry factor.

Nifty Mid-cap 50 Index, which tracks the movement of top-50 mid-cap stocks is seeing decent volumes after its entry into the derivatives segment (futures and options), as investors move away from index heavyweights and place bets on the fast-growth potential of top-rung mid-cap stocks. On October 09 2007, the futures trading volume in the Nifty Mid-cap 50 Index, touched Rs 2.41 crore (110 contracts) including Alstom Projects, BEML and Reliance Natural Gas. This is higher than the futures turnover in the CNX 100 Index, where derivatives trading commenced from June 01 2007.

Four State Governments auctioned 10 year paper maturing in 2017 through an yield based auction using multiple price auction method on October 08, 2007 at cut-off yields ranging from 8.31-8.40 with lowest for Maharashtra and highest for West Bengal .

On October 10, 2007, RBI auctioned 91-day and 364-day T-bills for the notified amounts of Rs.3,500 crore (out of which Rs.3,000 crore under MSS) and Rs.3000 crore (out of which Rs.2000 crore under MSS), respectively. The cut-off yields for 91-day and 364-day T-bills were 6.98 per cent and 7.37 per cent respectively.

Through a price-based auction using multiple price method RBI conducted the auctions of 5.87 per cent 2010 and 11.30 per cent 2010 for Rs.4,000 each with the cut-off yields of 7.78 per cent and 7.82 per cent, respectively. Both the auctions were held on October 11, 2007 under the Market Stabilisation Scheme (MSS).

Under the Market Stabilisation Scheme (MSS) on October 18, 2007, the RBI will re-issue 5.87 per cent 2010 and 11.30 per cent 2010 for Rs.5,000 crore each through a price based auction using multiple price method.

RBI conducted the auctions of 7.95 per cent 2032 and 7.99 per cent 2017 for a notified amount of Rs.4,000 and Rs 6,000 crore with the cut-off yields of 8.45 per cent and 7.91 per cent respectively. Both the auctions conducted on October 12, 2007 using multiple price based auction method.

Earlier, call rates held steady around 6 per cent, but ended the week at 4.50-5.00 per cent, down from the previous week’s close of 6.00-6.10 per cent. On the last day of the week, call rates dipped to 3.50-4.00 per cent with banks having covered products comfortably. Money market comfortably absorbed sale of risk free papers amounting to Rs 24,500 crore.

Bond prices dip sharply at the beginning of the week, as traders feared a liquidity squeeze since central banks step to sell bonds. However, excess liquidity coupled with increased supply of government bonds kept trades range bound amid thin activity. Price cut-offs at the auctions were higher. Volumes dipped to almost negligible as players eyed MSS and regular auctions with ample cash in hand.

On October 12, 2007, the Union Cabinet cleared oil bonds worth Rs 23,458 crore, which issued to government-owned oil marketing companies to partly compensate them for selling petroleum products at subsidised rates, with extended subsidy scheme for another three years. The decision pushed up the share prices of the three oil-marketing companies; Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation, by around 0.8 per cent on the Bombay Stock Exchange.

During the week two finance companies and financial institutions tapped the market: LIC housing Finance company tapped the market by issuing 3 years bonds by offering 9.15 per cent for an amount of Rs 200 crore. Crisil and Care have rated the issue AAA. Sundaram Finance Limited tapped the market by issuing 3 years bonds by offering 9.40 per cent for an amount of Rs 25 crore. Icra has rated the issue AA+.

IDFC Limited tapped the market by issuing 2 years bonds by offering 8.80 per cent for an amount of Rs 230 crore. Icra and Fitch have rated the issue AAA. NABARD tapped the market by issuing perpetual bonds by offering 9.50 per cent with a step-up of 10 bps through book building for an amount of Rs 200 crore. Crisil has rated the issue AAA. +. IDFC tapped the market by issuing 3 years bonds by offering 9.05 per cent for an amount of Rs 100+GS 100 crore. Care has rated the issue AAA.

Ample liquidity has positively boosted the corporate bond market sentiment. Average daily volumes in the secondary segment continued to remain robust above Rs 500 crore. However, yields could not gain equally from the excess liquidity leading to range-bound trades.

The rupee managed to hit a 9-1/2 year high of 39.28 per dollar but capped to attempt extend gains. In the beginning of the week, the rupee slipped to 39.45 per dollar due to RBI intervention and the dip in local stock market. However, the sheer size of inflows and the stock market rally pushed up the rupee mid-week. The rupee again got stuck into a range for the rest of the week and ended the week at 39.36 per dollar, still 10 paise stronger for the week

The National Commodity & Derivatives Exchange (NCDEX) is ready to launch spot markets along with 563 physical delivery centers across the country within a month. NCDEX Spot Exchange, the new company, will launch the spot markets and may include bullion spot markets and currency trading at a later stage.

On October 09, 2007 the Cabinet Committee on Economic Affairs, has declared a minimum support price (MSP) of Rs 1,000 per quintal for the year 2007-08 wheat crop to be marketed from April, and further announced a Rs 50 per quintal bonus over and above the MSP on the current year’s paddy crop. This comes along with a decision to ban export of all non-basmati rice with immediate effect. The MSP of Rs 1,000 per quintal for the wheat to be sown from November works out to Rs150 higher than the effective procurement price of Rs 850 per quintal paid for the 2006-07 crop. The latter was inclusive of a bonus component of Rs 100.

During the first six month of the current financial years drop in production of rubber and increase in consumption will keep the prices at higher levels for rest of the year as the estimated price band is Rs 85-90 a kg for RSS-4 grade. With imports of natural rubber expected to grow at a slower rate during October- December, the prices will further go up.

A top level Russian delegation led by leading sesame seed and groundnut importers is scheduled to visit India for about a week to see a number of certifying laboratories and processing systems in the country for its possible future business dealings will be arrive in Delhi on October 22. The delegation will visit laboratories in Chennai, Hyderabad , Delhi , Mumbai, Rajkot and Kandla and are likely to study the handling and shipment processes of sesame seed and groundnut from India .

Both the opponents and proponents of the futures trading in commodities are eagerly waiting for the report of the experts committee, on the role of futures trading in price rise that expected by the end of October headed by Planning Commission member Dr Abhijit Sen.

Rajasthan may exceed its 2007-08 mustard acreage target of 3 million hectare to about 3.2 million hectare, as sowing of the oilseed in the desert state takes place in October-November. The desert state is the country’s largest producer contributing about 40 per cent of country’s total mustard production. During 2005-06, mustard production in Rajasthan estimated between 3.0 and 3.5 million tones.

The commodity market regulator, Forward Markets Commission (FMC), in its latest directive to commodity exchanges, has retained the 2.5 per cent penalty, which halved from 5 per cent earlier, on delivery defaults for the contracts expiring in October and November. On the replacement cost to the aggrieved party, the FMC has asked exchanges to maintain status quo until further notice.

A year-on-year comparison of fortnightly turnover of all commodity exchanges shows a widening gap between 2007-08 and 2006-07 (April-September). The exchanges started on a positive note this fiscal, but lost way. There was an increased turnover in April because when the government announced ban of futures trading in wheat, tur and urad, many open positions were closed and participants exited the markets. The turnover of NCDEX has taken an effort to touch 1/7th or 1/8th of the total volume, compared to almost 1/3^rd of last year and the interest of the investors has gone down in trading agri-commodities. As per Madan Sabnavis, chief economist of NCDEX, there had been an increase in the volume in non-agri commodities to counter the loss, due to decline in investor’s interest in agri-commodities and frequent change in margins and position limits has had an adverse impact on agri-trading.

Corporate Sector

Wockhardt Hospitals Ltd., a chain of super specialty hospitals, is eyeing overseas markets. The group is implementing an overseas project and is hopeful of commissioning it in the next 12 to 18 months. As well the company is aiming at expanding to tier II cities.

Aptech, has launched N-Power, a new programme that provides hardware and networking training and said that it will be opening 50 N Power centres across the country by December.

L&T has entered into an agreement with Malaysia-based Tamco Corporate Holdings Bhd to acquire the latter’s de-merged switchgear business for $108 million. The pact will make it the first acquisition for L&T in switchgear business. With this acquisition, the company will have access to the fast-growing medium voltage (MV) switchgear markets like the Middle East and the EPC contractors that have approved use of Tamco’s products.

External Sector

The government has scaled down its export target for 2007-08 by over 12.5 per cent to US $ 140 billion, acknowledging the impact of the rising rupee on shipments. The commerce ministry had set an export target of US $ 160 billion at the beginning of this fiscal year. The value of the rupee has strengthened by over 11 per cent since January 2007 to close at a nine-and-a-half year high of 39.37 a dollar on October 8, 2007. The commerce ministry would propose for sector specific sops after realisation of the export figures for September 2007 and would also urge the finance ministry to include more services for refund of tax paid by exporters. The finance ministry on Saturday had expanded the number of services on which tax exemption was given to seven.

The rush of aspirants for telephony licenses do not reflect the government’s objective of bringing in more FDI in the sector with about 22 out of 46 companies submitting their applications with nil FDI. The increase in FDI in the telecom sector to 74 per cent from 49 per cent last year was expected to bring in 20 per cent increase in foreign investment in this segment in the next few years from a level of Rs 10,000 crore currently.

Information Technology

Moser Baer has acquired the video copyrights of Hindi and Gujarati titles from one of the India ’s leading home video company, Ultra Video.

Online real estate transactions are rapidly gaining momentum in the country, with those in the 25-40 age-group now contributing to around 80 per cent of business.

HP has announced its entry into the retail photo printing market in India with the launch of HP Retail Photo Solutions. The company also announced the launch of HP Snapfish, a leading consumer online photo service customized specially for the Indian market.

Infosys Technologies has posted an 18.4 per cent growth in net profits for the second quarter of the current fiscal at Rs 1,100 crore compared with profits of Rs 930 crore a year ago. Infosys’s income has increased by 19 per cent to Rs 4,106 crore from Rs 3,451 for in the corresponding quarter in the previous year.

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.