Due to the ever-increasing demand of edible oils caused by the increased consumption of high-value value food products, there is an unprecedented opportunity of improving the farmer’s income. Moreover, India has been importing edible oils and its derivatives annually worth ₹70,000 crore or more. The government of India has introduced the new Mission under The National Mission on Edible Oils - Oil Palm (NMEO-OP) rightly about six months ago for domestic oil seeds and oil palm, with the objective of encouraging domestic oilseeds production and oil palm cultivation across India. Farmers need to shift their traditional crops of low value and yield to a higher value-added crop, like oil palm.
Rome was not built in a day. The Indian oil palm history over last three decades has witnessed the fall and rise of area expansion, price of Fresh Fruit Bunches (FFBs) etc. and whatever unfolded in the past was not up to the mark. The area under oil palm in India has increased at a snail’s pace but steadily over last three decades, from 8585 hecatares in 1991-92 to 3,86,700 hectares approx.) till January 2022.
However, it has provided a strong foundation for the future. Support from the government of India in one form or other is needed and should continue, till we become competitive through scale of FFB yield improvement (from 10 tonnes per hectare to 20 tonnes) to match the global standards. There is a need to ensure that every aspect of the value chain works efficiently. Every element like genetics, sustainable agricultural practices, farmers remuneration, process technology, Infrastructure, location etc must be optimised.
However, farmers from Andhra Pradesh (AP) and Telangana are getting FFB yield, on an average of 20 tonnes a hectare, which is approximately equal to the global standard. Oil palm has been accepted by farmers of Andhra and Telangana wholeheartedly. All stake holders such as farmers, scientists, State Department of Agriculture and Horticulture, Ministry of Agriculture, the Union Government, and processors deserve credit for this success.
There is no readymade formula to tackle the slow progress of oil palm expansion in certain other States which are facing the challenges of acceptance of the oil palm crop at a large scale. The way forward is to avoid certain mistakes such as selecting farmers for planting oil palm in areas without assured water resources. It has been observed that if area expansion and crop yield remain poor, the flow of investments will be poor.
The known unknowns for 2022 and onwards
There are still many known risk factors that could influence the course of area expansion programme, specifically in north-east States (as huge area expansion programme projected to the extent of 3.28 lakh hectares till 2025-26, out of total additional 6.5 lakh hectares under NMEO-OP by 2025-26 in India), where infrastructure and road connectivity is poor, acceptance of the crop is not assured, and cost of cultivation is high, and marketing is an issue. Besides these, price volatility of crude palm oil in international market will play a key role. However, NMEO-OP has made good attempt by providing certain measures to cope up these issues.
Positive drivers now onwards
NMEO-OP is effective from FY2021-22 to FY2025-26 and is applicable for all States / UTs with a funding pattern of 60:40 and for North- East States 90:10. Few important highlights of this scheme:
1. Concept of Viability price of FFB introduced for the first time and thereby promising assured returns to oil palm farmers.
2. Concept of formula price for the FFBs is expected to be declared which will replace the CACP formula of 2012.
3.This scheme also ensures that due to any reason whatsoever, if the payment to the farmers by Processor is below the viability price, the government will provide a viability gap funding to ensure that the farmers get payment to the level of the viability price.
The above is applicable only if states adopt the formula of payments of FFBs. Besides these, the government has substantially increased the various subsidies for the ongoing components required for oil palm cultivation, like Fertiliser input cost, Plant material cost, irrigation cost, inter cropping subsidy etc. and encouraging to introduce high yielding plant material through import.
I am also optimistic that crude palm oil (CPO) price is expected to remain high or may maintain the current price level at least for another one year or more, due to increase in demand for edible oils after the ease of pandemic restrictions in home, restaurant and catering (HoReCa) industry and in spite of yield output increases in Malaysia and Indonesia, edible oil prices are also now linked to energy prices - the central point being biofuels.
Meet the massive demand for the crop in the states where the crop has been largely accepted by farmers and create massive demand stimulation in the states where the crop is yet to be accepted in large scale by farmers - in two ways to move and act, like:
1. In Telangana and Andhra Pradesh, where farmers response for the crop is highly positive - move like a Cheetah-
a) Make huge numbers of seedlings available for planting by growing number of nurseries in the vicinity with advanced planning and arrangement with seed source/ supplier.
b) Explain the crop economics to new farmers.
c) Training and capacity building will remain as high priority.
2. In other States (including North- East) where oil palm is yet to be embraced by the farmers, processors in association with State Government - move and work like an Elephant, i.e., work hard, deliver the numbers effectively over a period of time and ensure that further no mistakes followed, based on past experience.
In case of North- East States, Infrastructure is the major issue and will take time to be built. Accordingly processors have to structure themselves in terms of investment towards area expansion programme and address local issues in association with local State government.
Cluster approach should be followed everywhere. State Government and Processors should utilise the funds allotted by G.O.I. effectively for the purpose. A rational approach is required by the State and Processors. The bottom line is Oil Palm development in India requires a long-term commitment and a long-term Investment.
(The writer is former CEO-Oil Palm Plantation, Godrej Agrovet Ltd, views are personal)