In a report titled-- Indian Oilseed Complex: Capturing Market Opportunities-- the bank has recommended a possible sequence of individual packages of sectoral reforms to a complex transition process much needed to allow the Indian oilseed industry to realise its full potential. The report says piecemeal approaches does not release the untapped potential. A comprehensive strategy characterised by a sequence of packages of internally consistent reforms is essential to lay the foundation for a sustained growth in the Indian oilseed economy.

This include the creation of a truecommon domestic market and the removal of the multiple anachronistic restrictions on private- sector activities which now serve as incentives to profit from cheating.

The first set of reforms could begin with fine-tuning the external trade regime, consistent with the World Trade Organisation (WTO) rules, by; extending the export liberalisation to all oilseeds, legislating Intellectual Property Rights (IPR); extending import liberalisation to all edible oils while maintaining current and homogeneous tariffs across all edible oils. The bank report said "establishing the external trade rules and institutions, consistent with WTO rules, to deal with international price spikes; rationalising food labelling regulations, reinforcing monitoring capacity to and raising awareness of health issues by distinguishing product labelling between the traditional pungent mustard-seed oil and healthier rapeseed oil, manufactured from double zero varieties of seeds."

The first set of reforms are easiest to implement since itis only departure from current policies is the liberalisation of oilseeds exports, which will not affect the high natural barriers blocking any sudden wave of exports.

Rather it would provide a badly needed floor to the local market, protecting farmers from having to bear the brunt of any squeezes on Indian processors margins, the report contends. The second set of actions would modernise domestic trade and processing policy by removing oilseed complexes from the scope of the EC Act, removing the oilseeds complex permanently from the scope of the RBI's Selective Credit Control Policy and promoting the use of warehouse receipts.

The action also include lifting small-scale industry reservation from its application to crushing equipment especially for groundnut, rapeseed-mustardseed and safflower expelling, allowing forward and futures trading (hedge contracts) in oilseeds and its derived products. Besides promoting the establishment in co-ordination with the private sector and formulating standard qualitynorms and contracts, and improving contract arbitration procedures are proposed by the bank.

It also moots harmonising and standardising the taxation of oilseeds and their products, at a rate consistent with processing margins, such as replacing the sales taxes with an excise tax, phasing out state government interventions in operations of cooperatives and establishing an agricultural price-and-trade surveillance unit.

The third set of changes sought by the World Bank are modernisation of the market by asking the state governments to decentralise the financial and management authority of regulated markets, develop grading facilities, facilities for bulk transportation and handling of oilseeds in markets. This should lead to the promotion of quality incentives in payment schedules by seed purchases, legalising direct sales of oilseeds to processors, disseminating price information, establishing the policy framework necessary to promote private investment in market, storage, transport and improving portinfrastructure in collaboration with the private sector.

The fourth measure would improve the regulatory and institutional framework on health and quality issues by tightening national food safety standards on edible and hydrogenated oils. The report further says that improving monitoring and enforcement capacity of food safety institutions, pollution controls, better treatment of effluents and the reduction of hexane losses in oilseed processing. Raising consumers' awareness about health and quality concerns and oilseed processors' appreciation of appropriate technologies and labelling are some of the highlights.

The report suggests updating the labelling of edible oils. For example, all refined edible oils could be labelled in the same way, whether or not manufactured from solvent extraction oil. "There is no reason to forbid the vanaspati industry to use particular crude oils such as mustard seed expeller oil," the report says.

The application of food safety regulations could be adapted to permit thecontinued use of pungent mustard oil as premium niche market for small scale expellers, notably in the north-east.

The final step in the reform process would be to complete external trade liberlisation through exports of vegetable oils and the imports of edible oils. Import liberalisation of oilseeds could come earlier in the reform process depending on the degree of progress in deregulating the domestic crushing industry and trade.

Without free imports of oilseeds, the profitability and viability of the crushing industry can be jeopardised if domestic prices rise above international level.

It will rise even if domestic reforms are successful in improving the performance of marketing and processing in the oilseeds complex. Domestic oilseed prices will also rise in event of production shortfalls, in which case the import of oilseeds should be allowed to provide the much needed relief to the crushing industry.