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Wrong Policies of State Governments will hurt Investments, Employment and Farmers

Madhya Pradesh wrong industrial policy will hurt national food security, farmers income, employment generations and revenue generation and hurting “Make in India.”

 New Delhi, 16 March 2021: The national government, the Hon’ble Prime Minister of India through parliament are working hard for doubling farmers’ income. The three agri-trade laws will also create new opportunities for farmers to explore better markets. Encouraging agro-processing units will benefit farmers and consumers as well.

 Today, 70% of domestic edible oil requirements are dependent on imported oils. To bridge the gap and to use the edible oil sector for overall rural development of India and better income for farmers, the government of India is working on an ambitious oilseed mission to improve national food security, to improve farmers income, to improve employment generations and to improve revenue generation by promoting “Make in India”.

Some of the policies of oilseed producing states are not in line with the national objective.

Why are state governments not aligned with the national agenda?

 Industrial Promotion Policy, 2014 of Government of Madhya Pradesh, in Annexure-B highlights the list of ineligible industries for any type of support and encouragement, at serial number 13, mentions ‘Refining of edible oils (Independent unit) and Soya bean oil-producing units (Including refinery)’. It means investments in soybean processing are not eligible and entitled to incentives provisioned under the industrial policy of the state. This is a very regressive and illogical step. This must change with immediate effect.

 The same provision was there for the cement industry as well, but this was changed from the List of ineligible industries as per the GoMP order no. F 16-18/2018/A-Eleven dated 28/08/2018, stands deleted which was mentioned in Point 14 – ‘Cement (Including clinker) manufacturing’. This policy change benefited the MP state in many ways, it is visible from the employment, tax revenue and investment data.

Why should this state policy change?

 Madhya Pradesh has the largest area under soybean cultivation but the average productivity is very low in comparison to many other states. This is a serious concern because poor productivity means a higher cost of production and less chance of investment in the state. Now with the lack of support for the new investment for soybean processing Madhya Pradesh government is putting their farmers and local industry in serious trouble because only new investors will explore how to improve the productivity and better service to farmers. Existing companies have exhausted their efforts and have done enough which is why there is stagnation in productivity leading to higher cost of production and less capacity utilization.

The poor investment will lead to poor productivity and poor quality leading to poor capacity utilization, poor farmers income and poor GST for the states

 Madhya Pradesh policymakers must appreciate that in the last two decades the quality standards of major buyers of soybean meal i.e. poultry industry is at par with global standards. This is essential to meet productivity levels in the poultry sector.

 Unfortunately, the standards adopted by the soybean processing industry in Madhya Pradesh is outdated. This is the reason why the Madhya Pradesh soybean industry is operating at low capacity utilization. In place to encourage good business practices and to encourage competition for better price realization for farmers, state policy is preventing and discouraging new investment and trying to protect companies without outdated technologies and give bad quality and unable to meet the quality requirement of the market.

It is shocking to see that even today, some coming from Madhya Pradesh permits 2% sand and silica in food items like soymeal. This is shocking. This is only possible when companies are using either outdated technologies or there is a deliberate attempt to mix sand and silica as an adulterant to add weight into the product after processing to increase profit due to unethical means. There is no way, this high level of impurities can come into soybean meal. If required, the Madhya Pradesh government can institute an enquiry to know why the quality of Soybean meal is so bad in the state.

Implications of the outdated industrial policy:

Due to this outdated and illogical investment policy of the Madhya Pradesh state, new investment is going to other states like Maharashtra and Rajasthan. Due to the poor quality of soymeal in Madhya Pradesh, many poultry companies have started investing in backward integration. In place of buying from the existing soybean processing companies, they are installing their facilities and making good quality soybean meals to meet quality norms. This clearly shows that poor capacity utilization in Madhya Pradesh is due to poor quality production. This is also hurting GST collection within Madhya Pradesh State, hurting new employment opportunities and better technology transfer. Lack of major investment in Soybean processing will also discourage investment in ancillary units like packaging, transportation, warehousing, feed manufacturing etc.

Lack of new investment and poor capacity utilization of existing co companies will hurt soybean farmers of Madhya Pradesh. The new three agri-trade Acts will encourage investment outside Madhya Pradesh in the states where there is a more conducive investment climate.

What Madhya Pradesh policymakers should do?

 This outdated industrial policy for soybean is giving false protection to outdated industries and industrialists who are not willing to invest to upgrade their old technologies and outdated quality systems. This is pushing their soybean meal buyers out of states to other states. Is this good for the state and farmers of Madhya Pradesh?

My request and suggestions are to encourage competition in the soybean processing space. Bad companies have to move out of business to create space for new ones. This is an essential part of development and progress. This will force the upgrading of existing companies and better price realization to farmers. Immediately remove the soybean industry from the Annexure-B mentioned ineligible list from the Industrial Promotion Policy’2014.

It is high time to show leadership for a better future for all.


About Mahender Bansal

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