India’s Quest For Self-sufficiency In Edible Oils
ON APRIL 28, TWO MONTHS AFTER the Russia-Ukraine war began, Indonesia banned export of palm oil to contain soaring cooking oil prices. India, the world’s largest importer of palm oil, got into a firefighting mode to prevent shortage of edible oil. When domestic prices shot up, Central government had to issue an assurance to people that the country had sufficient stock of edible oils. It said it has a stock of 21 lakh metric tonnes (LMT) edible oils, while another 12 LMT is in transit.
The ban, and resulting supply disruptions, was another reminder of India’s vulnerability to fluctuations in international edible oil markets — India imports over 133 lakh tonnes edible oil worth ₹80,000 crore every year, more than half its demand. Edible oil and related products such as vegetable or animal fats is India’s 7th-largest import category. Shortage and resultant price increase can derail India’s fiscal calculations and fuel inflation.
Disruption from Indonesia (Malaysia is the other source of palm oil) was particularly worrisome as palm oil, crude & refined account for roughly 62% of edible oil imports. While soybean oil, which is 22% of India’s edible oil imports, comes from Argentina and Brazil, sunflower oil (15% of edible oil imports) comes from Ukraine and Russia.
Behind the brave face that India displayed were a series of measures taken recently to improve availability of edible oils: Cut in basic duty on crude palm oil, crude soyabean oil and crude sunflower oil from 2.5% to zero; cut in agri-cess on these oils from 7.5% to 5%; slashing of basic duty on refined soyabean oil and refined sunflower oil from 32.5% to 17.5% and basic duty on refined palm oil from 17.5% to 12.5%. Government also allowed duty-free import of refined palm oil till December 31, 2022, and extended concessional import duty on all edible oils up to September 30, 2022. It also imposed stock limits. Fortunately, by May-end, Indonesia restored exports.
Still, these supply disruptions brought to the forefront the need to slash import dependence in a commodity where, even after 75 years of Independence, only 45% demand is met by domestic production. In order to do exactly that, in August 2021, the government had launched an ambitious National Edible Oil Mission-Oil Palm (NMEO-OP) to reduce dependence on imported edible oil from 55% to 40%. The target is to increase area under oil palm cultivation from 3.7 lakh hectares to 10 lakh hectares and produce 11.2 lakh tonnes crude palm oil or CPO (from 2.72 lakh tonnes in FY21) by FY26 and 28 lakh tonnes by FY30. Since oil palm, with yield of around four tonnes per hectare, produces at least 10 times more oil than other oilseeds, it is considered the only crop that can help India become atmanirbhar or self-reliant in edible oil.
With an outlay of ₹11,040 crore and framework that has been well-received by stakeholders, Centre seems to be doing everything possible to make NMEO-OP work.
Bitter Truth India’s attempts to increase domestic edible oil production are not new. “Irrigated oil palm cultivation was introduced in 1983, Technology Mission on Oil Seeds was initiated in 1986,” says Balram Singh Yadav, MD, Godrej Agrovet, which cultivates and processes oil palm. Central government had identified 5.75 lakh hectares in nine states for cultivation of oil palm in 1988. The first Oil Palm Development project was launched in 1990.
India had 8,585 hectares under oil palm in FY92. These initiatives led to a sharp increase to 3.7 lakh hectares in 30 years but this was not enough. Growth in edible oil consumption, currently above 25 million tonnes, kept outpacing domestic production, which was 12.29 million tonnes in FY21. Per capita consumption of edible oil, 15.8 kg per person per annum in FY13, is 19 kg today. “The performance (of palm oil missions) has not been encouraging so far. Only 16% potential area (out of 19.3 lakh hectares) has been brought under oil palm cultivation. Only 74% subsidy has been utilised since FY05 (after government started offering incentives for oil palm). The utilisation rate is only 50% since FY14, indicating poor execution (of government programmes),” says Yadav. He blames random changes in price by governments, shortage of quality seedlings due to low subsidy, delay in disbursement of fertiliser subsidy to farmers and processors and poor farmer hand-holding during the gestation period. The question whether the new NMEO-OP scheme will give different results than earlier ones arises out of this bitter experience.
Read More at https://www.fortuneindia.com/long-reads/indias-quest-for-self-sufficiency-in-edible-oils/109226