26/09/2009 (MSN) - ASEAN agreement would spell death knell to Kerala’s economy which is centered around Marine products, Spices, Coconuts, coconut products including edible oils, cashew, vanilla, Rubber, Copra, and many other items which have mainstay in the economy of this small state which depends exclusively on the Retail economy with very negligible Gross State Domestic Product from Manufacture.

Association of South East Asian nations consist of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam. The Government of India feels that by signing this agreement, the Indian trade segments like banking, information technology, telecom, pharmaceuticals, coal mining and automobiles sectors will be benefited. However, the concessions extended to import from these countries would include the edible oil sector, marine products, spices, pepper, coconut and coconut products, other farm products etc. Even though 489 farm products are placed in the ‘negative list’, the market access to palm oil is  at zero duty and refined palm oil 7.5%, even though the agreement stipulate that the duty of 37.5% for palm oil and 45% for refined palm oil be reduced in phases only by 2018. India’s decision not to impose duty on crude palm oil while maintaining 20% duty on soybean oil is expected to favour refined, bleached and deodorized palm oil export from Malaysia which clocks 65,000 tonnes/month.  This comes at a time, when China who abolished palm oil quota in 2002, have ceased to import Palm oil in the refined form. The tax differential of US $ 235 per tonne in December 2008 against US $ 336/tonne in November 2008 and nil duty after January 2009 will enhance the competitiveness of palm oil which is priced around Rs 35 per litre.   India is importing crude palm oil, also from Indonesia. Malaysian palm oil exports in September 2009 rose 3.9 per cent (1.04 million) against its August shipments estimated at 1. Million tonnes

India accounts for production of 5 lakh tonnes of Coconut oil.  It is a fact that 50% of the Coconut production of around 16000 million nuts is used for other purposes other than consumption.  .  According to a recent study on consumption, there has been a growth in household consumption. At the same time, it has shown a sharp fall in industrial off take, due to availability of palm oil at around Rs 35 /litre. India imports 40% of its edible oil consumption requirements with an annual consumption of 11 million tonnes, the per capita annual consumption being 11.50 Kgs, which is very low compared to China (17 Kg) and world average of 20 Kgs.   Indian vegetable oil is world’s 4th largest after USA, China and Brazil. If we presuppose the per capita consumption of edible oil to increase by 4% a year and a population growth of 1.8%, overall growth in demand for edible oils can settle at 6%. India’s combined kharif (winter) and rabi (summer) crops of oil seed during 2007-8 was 272 lakh tonnes against which production of vegetable oil is estimated at 85 lakh tonnes. The demand is estimated at 105 lakh tonnes.   However, the Government seems to conclude that the demand would touch 130 lakh tonnes in 2010 and 208 lakh tonnes by 2015, when the growth based on economic formula at 6% annual growth in consumption would be much lower than the figure predicted.  Moreover, even though we had fixed our eyes on a growth rate of 4% for agriculture, little has been done to improve the yield through higher productivity by modernizing the farms. We seem to have given up agriculture growth and our economists are predicting only 1% growth in 2009-10.

India is reported to have imported "almost half of its annual domestic demand of about 11-12 million tonnes of edible oil in the form of palm oil from Indonesia and Malaysia and soya oil from Brazil and Argentina". India, it said, has imported 3.6 million tonnes of oil since November.