IDEAS home Printed from https://ideas.repec.org/p/ags/iffp12/16125.html

Managing Price Volatility In An Open Economy Environment: The Case Of Edible Oils And Oilseeds In India

Author

Listed:
  • Srinivasan, P.V.

Abstract

This study examines the impact of alternative price stabilization policies for edible oils and oilseeds in India on the farmers growing oilseeds, the consumers of edible oils and the processing sector with the help of a multi market equilibrium dynamic simulation model. Price stability in the edible oil sector is important at least for two reasons. It can help realize the growth potential in the production of edible oils and improve the nutritional security of Indian households. While efficiency considerations suggest the linking of domestic to world prices, extreme fluctuations in price have to be avoided, for they can lead to undesirable consequences both at the macro and micro levels. The questions addressed in this study include the following. What is the effectiveness of alternative price stabilization mechanisms in stabilizing oilseed/ edible oil prices? Can variable levies that vary within the bound tariff level provide adequate protection against world price fluctuations? What are the costs to the government, benefits to producers and consumers? What is the impact on prices of oilseeds due to the operation of variable levies edible oil imports and vice versa? The following are some of the results obtained from the model. Higher import tariffs on edible oils lead to more variable domestic prices. This indicates that a fixed level of tariff even at a higher level is not useful in stabilizing oil prices. A system of variable levies which adjust to international price and domestic supply situation is what would be required. Tariff protection on oils mainly benefits the processing sector and the benefits to oilseed growers are relatively smaller. Tariff protection to growers by iii increasing tariffs on oilseed imports helps the producers of oilseeds, but at the cost of consumers and the processing sector. The distribution of benefits to different agents varies with the different alternative mechanisms used for price stabilization. As the bound rates of tariffs under WTO are fixed quite high for all edible oils with the exception of soy oil, there is enough room to adjust import duties for price stabilization purposes. The maximum import tariff rate required to stabilize prices within a reasonable price band is as low as 25%.

Suggested Citation

  • Srinivasan, P.V., 2004. "Managing Price Volatility In An Open Economy Environment: The Case Of Edible Oils And Oilseeds In India," MTID Discussion Papers 16125, CGIAR, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:ags:iffp12:16125
    DOI: 10.22004/ag.econ.16125
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/16125/files/mt040069.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.16125?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Srinivasan, P. V. & Jha, Shikha, 2001. "Liberalized trade and domestic price stability. The case of rice and wheat in India," Journal of Development Economics, Elsevier, vol. 65(2), pages 417-441, August.
    2. Servaas Storm, 1999. "Foodgrain price stabilisation in an open economy: A CGE analysis of variable trade levies for India," Journal of Development Studies, Taylor & Francis Journals, vol. 36(2), pages 136-159.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A. Ganesh-Kumar & Manoj K. Panda & Mary E. Burfisher, 2006. "Reforms in Indian agro-processing and agriculture sectors in the context of unilateral and multilateral trade agreements," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2006-011, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Kamil Czwartkowski & Arkadiusz Wierzbic & Wojciech Golimowski, 2022. "Quality, Key Production Factors, and Consumption Volume of Niche Edible Oils Marketed in the European Union," Sustainability, MDPI, vol. 14(3), pages 1-17, February.
    3. Bathla, Seema & Srinivasulu, R., 2011. "Price Transmission and Asymmetry: An Empirical Analysis of Indian Groundnut Seed and Oil Markets," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 66(4), pages 1-16.
    4. Ramilison, Eric Norbert, 2006. "Will Madagascar benefit from the South African market opening to SADC goods ?," Conference papers 331461, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marta Marson & Donatella Saccone & Elena Vallino, 2023. "Total trade, cereals trade and undernourishment: new empirical evidence for developing countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(2), pages 299-332, May.
    2. Balié, Jean & Valera, Harold Glenn, 2020. "Domestic and international impacts of the rice trade policy reform in the Philippines," Food Policy, Elsevier, vol. 92(C).
    3. Brockhaus, Jan & Kalkuhl, Matthias & Kozicka, Marta, "undated". "What Drives India’s Rice Stocks? Empirical Evidence," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235659, Agricultural and Applied Economics Association.
    4. Sayaka, Bambang & Masjidin Siregar, Sumaryanto & Croppenstedt, André & DiGiuseppe, Stefania, "undated". "An assessment of the impact of higher yields for maize, soybean and cassava in Indonesia: A multi-market model approach," ESA Working Papers 289035, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    5. Gamal M. Siam & André Croppenstedt, 2007. "An Assessment of the Impact of Wheat Market Liberalization in Egypt; A Multi-Market Model Approach," Working Papers 07-15, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
    6. Ashutosh K. Tripathi, 2024. "Price support policy and market price dynamics: The case of Indian wheat," Agricultural Economics, International Association of Agricultural Economists, vol. 55(2), pages 412-427, March.
    7. Dethier, Jean-Jacques & Effenberger, Alexandra, 2012. "Agriculture and development: A brief review of the literature," Economic Systems, Elsevier, vol. 36(2), pages 175-205.
    8. repec:ags:aaea22:335623 is not listed on IDEAS
    9. Rashid, Shahidur & Gulati, Ashok & Cummings, Jr., Ralph, 2008. "From parastatals to private trade: Lessons from Asian agriculture," IFPRI books, International Food Policy Research Institute (IFPRI), number 978-0-8018-8815-1 edited by Cummings, Ralph Jr.; Gulati, Ashok; Rashid, Shahidur, July.
    10. Isaac Ketu & Stéphane Mbiankeu Nguea, 2024. "Globalization and the “zero hunger” goal in Africa: Starving in an open world?," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(7), pages 2769-2789, October.
    11. Marta Kozicka & Dr Matthias Kalkuhl & Jan Brockhaus, 2015. "Food Grain Policies in India and Their Implications for Stocks and Fiscal Costs: A Partial Equilibrium Analysis," EcoMod2015 8377, EcoMod.
    12. Christophe Gouel & Sébastien Jean, 2015. "Optimal Food Price Stabilization in a Small Open Developing Country," The World Bank Economic Review, World Bank, vol. 29(1), pages 72-101.
    13. Srinivasan, P. V., 2004. "Managing price volatility in an open economy environment: the case of edible oils and oilseeds in India," MTID discussion papers 69, International Food Policy Research Institute (IFPRI).
    14. Galtier, F., 2009. "How to Manage Food Price Instability in Developing Countries ?," Working Papers MoISA 200905, UMR MoISA : Montpellier Interdisciplinary center on Sustainable Agri-food systems (social and nutritional sciences): CIHEAM-IAMM, CIRAD, INRAE, L'Institut Agro, Montpellier SupAgro, IRD - Montpellier, France.
    15. A. Ganesh-Kumar & Ashok Gulati & Ralph Cummings, Jr, 2008. "Reforming foodgrains management: Achieving food security with cost-effectiveness," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-027, Indira Gandhi Institute of Development Research, Mumbai, India.
    16. Bradford, Scott C. & Negi, Digvijay Singh & Ramaswami, Bharat, 2022. "International risk sharing for food staples," Journal of Development Economics, Elsevier, vol. 158(C).
    17. World Bank Group, 2014. "Republic of India : Accelerating Agricultural Productivity Growth," World Bank Publications - Reports 21419, The World Bank Group.
    18. Tripathi, Ashutosh K. & Mishra, Ashok K., 2023. "Assessing the Relationship between Public Stockholding and Market Price Dynamics: The Case of Wheat Market in India," 2023 Annual Meeting, July 23-25, Washington D.C. 335622, Agricultural and Applied Economics Association.
    19. Tripathi, Ashutosh K. & Mishra, Ashok K., 2023. "Impact of Agricultural Policies on Wheat Market Prices: Evidence from India," 2023 Annual Meeting, July 23-25, Washington D.C. 335623, Agricultural and Applied Economics Association.
    20. World Bank, 2012. "Using Public Food Grain Stocks to Enhance Food Security," World Bank Publications - Reports 11878, The World Bank Group.
    21. Dawe, David, 2001. "How far down the path to free trade? The importance of rice price stabilization in developing Asia," Food Policy, Elsevier, vol. 26(2), pages 163-175, April.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:iffp12:16125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/ifprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.