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India accounts for 44% of world palm oil imports

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Need innovative growth strategies: A file picture of a farm worker arranging oil palm fruit bunches.
Need innovative growth strategies: A file picture of a farm worker arranging oil palm fruit bunches.

Oil Palm (Elaeis guineensis) belongs to Arecaceae family and is a native of West Africa. Oil is extracted from both the pulp of the fruit and the kernel, which find wide applications in food and industry.

India is the largest consumer of palm oil in the world, consuming around 17 per cent of total world consumption. Indonesia is the largest oil palm producer contributing to over 40 per cent of the world production. India is also the largest importer of palm oil amounting to 44 per cent of world imports.

Palm oil is widely used as cooking oil and is extremely tolerant to high temperatures. It is used as industrial frying fat and is also well suited for processing noodles, potato chips, french fries, doughnuts and other snacks.

Used to produce vegetable ghee or vanaspati, palm oil can also be used in shortening for bakery products, as an ingredient in ice-cream, as a non-dairy creamer or coffee whitener and confectionary fat. Palm oil also finds applications in soaps, epoxicide oil used in plastics, oleo chemicals, fatty acids, diesel substitutes, glycerols etc.

Output

With an estimated global production of 49.3 million tonnes of crude palm oil in 2011, oil palm is grown in about 40 countries of the world covering an area of 14.9 million ha. The world average yield of palm oil is reported to be 12.2 tonnes fresh fruit bunch (FFB)/ ha, and Guatemala, Nicaragua and Malaysia top the yield chart with 24.6, 24.3 and 21.1 tonnes/ha respectively.

Indonesia and Malaysia are the leading oil palm producers contributing 40.8 per cent and 40.3 per cent to the world production respectively followed by Nigeria, Thailand and Colombia

India holds a tiny share in area and production of palm oil, although it is the largest consumer of palm oil, with an estimated consumption of approximately eight million tonnes (2010-11).

Palm oil was introduced in India as a small-holders irrigated crop in 1989 to meet the growing demand for vegetable oils. Estimated area under palm oil cultivation in India is about 1,71,000 ha producing approximately 66,000 tonnes of crude palm oil (2010).

Andhra Pradesh is the leading palm oil producing state in India contributing approximately 86 per cent of country's production followed by Kerala (10 per cent) and Karnataka ( two per cent). Other oil palm producing states include Orissa, Tamil Nadu, Goa and Gujarat.

Imports

India is the net importer of palm oil which constitutes about 80 per cent of the country's total edible oil imports. India's import of crude palm oil was estimated at about 8.2 million tonnes in 2010-11 and Malaysia was the leading supplier of oil palm constituting over 20 per cent of the total imports. Other countries supplying refined and crude oil palm to India include Indonesia, Germany, Italy and China.

Crude palm oil

The major crude palm oil markets in the world are bursa Malaysian derivative (BMD) and Indonesia market. In India, crude oil palm is traded in Kandla, Mumbai, Kakinada, Chennai, Vijayawada, Haldia and Indore.

Crude palm oil is also traded at the Indian commodity exchanges such as National Commodity & Derivatives Exchange Ltd (NCDEX), Multi Commodity Exchange of India Ltd (MCX) and National Multi Commodity Exchange Ltd (NMCE). The oil prices in India move largely in line with international palm oil price movements and domestic demand and supply situations.

Schemes for development

The Union Government has undertaken definitive schemes and programmes to increase oil palm production in India considering the heavy dependence of the country on edible oil imports. Oil palm development programme (OPDP) under Technology Mission on Oilseeds and Pulses and Programme of oil palm area expansion (OPAE) under Rashtriya Krishi Vikas Yojana (RKVY) are some of the ambitious schemes of the Government.

Under the Union Budget 2011-12, Rs.300 crore has been proposed to bring 60,000 hectares under oil palm plantation, by integrating the farmers with the markets. The initiative is expected to yield about three lakh tonnes of palm oil annually in five years.

However, the consumption and import of oil palm has been constantly rising while there has been a negligible increase in domestic production. Creation of adverse price atmosphere due to heavy price fluctuations, availability of cheaper imported oil palm and lack of processing facilities has affected the area expansion under oilseeds particularly in the states of Orissa, Tamil Nadu, Goa and Gujarat.

Promoting oil palm cultivation

Organisations such as Oil Palm India Ltd, a joint venture between the Government of Kerala and Government of India have been promoting oil palm cultivation among the small holders.

Godrej Agrovet is one of the leading private companies involved in oil palm production and has developed over 35,000 ha of oil palm in about eight states.

Ruchi Soya Industries Ltd and Foods Fats & Fertilisers are the other companies engaged in oil palm business.

While there is a need to promote oil palm by the way of area expansion and better cultivation practices, it is equally important to focus on innovative growth strategies such as marketing of high grade derivatives and nutraceuticals, bio-mass utilisation and branding of palm oil as healthy cooking medium.

Source: YES Bank

(This article was published in the Business Line print edition dated November 21, 2011)
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