Agri Business

Godrej Agrovet eyes oil palm expansion

Vishwanath Kulkarni Bengaluru | Updated on August 20, 2021

Balram Yadav, MD, Godrej Agrovet   -  x

Company proposes to bring up to 1 lakh hectares under the oil crop next 5-6 years

Diversified agribusiness player Godrej Agrovet Ltd (GAVL) is eyeing major expansion in oil palm following the Centre’s new policy announcement. The company proposes to bring up to one lakh hectares (lh) under oil palm in the next five to six years. Currently, Godrej works with farmers in Andhra Pradesh, Telangana and Tamil Nadu, where it has about 65,000 hectares under oil palm.

“We can bring around one lh under oil palm over the next five years, provided the new policy is implemented lock, stock and barrel,” said Balram Singh Yadav, Managing Director, Godrej Agrovet.

On Wednesday, the Centre approved ₹11,040 crore National Mission on Edible Oils – Oil Palm to reduce imports by promoting the crop in 6.5 lh and increasing the crude palm oil (CPO) output to 11.20 lakh tonnes by 2025-26. The policy provides price assurance to the farmers through viability gap funding, besides incentivsing the inputs and planting material.

‘Transparent formula’

Yadav said the new policy has brought some certainty in terms of pricing and the formula is transparent. “The Centre has done its job. Now the States should also pick it up to facilitate growth,” he added.

There’s big queue of farmers wanting to shift to oil palm, considering the returns it has generated this year on increase in oil prices, Yadav added.

Godrej Agrovet will also be expanding its oil milling capacity, but it is too early to quantify the investments, he said. The company has three processing mills in Andhra Pradesh, and one each in Tamil Nadu, Goa and Mizoram with a combined processing capacity of 3,000 tonnes per hour. “Our capacity utilisation is about 80 per cent during the four-month season,” Yadav said adding that company has plant capacity for the next three years. The company produced around 1.1 lakh tonnes of crude palm oil last year, which it sold to refiners.

The company is also eyeing for lands in Mizoram and the Andamans. “In a year’s time we would have surveyed more States. With these kind of benefits, lot of States will jump into the bandwagon. I have a strong view that Assam and Meghalaya will take this up very strongly,” Yadav said.

Andaman is the best place for oil palm because it rains a lot, soils are very good and temperature is very similar to Indonesia and Malaysia, Yadav added.

Carbon Positive Business

On the ecological implications, Yadav said that in India oil palm is a carbon positive business, unlike in Indonesia and Malaysia, where forests are cleared killing flora and fauna to grow oil palm trees. “In India, we are converting paddy lands into oil palm. Crop diversification is also happening. Soils are depleted because of monoculture. It is carbon positive and good for the environment. Can you imagine that one hectare of oil palm now has 150 trees instead of none?” he said.

Water intensive?

Oil palm is a water intensive crop, but drip is changing the game, Yadav said. “There’s attractive subsidy for drip irrigation and about 80-90 per cent of our plantations have drip irrigation and the water utilisation is very judicious. In comparison, oil palm is not as water intensive as paddy and sugarcane,” he said.

While official estimates indicate that oil palm is grown in about 3.5 lh, the acutal area is around 2.5 lh as there has been some uprooting by farmers, he said. Palm oil production in the country is estimated at 4 lakh tonnes.

In India, Yadav said, production costs are higher due to lower productivity and oil recovery mainly due to temperature and rainfall conditions, when compared with Indonesia and Malaysia.

The average yields of fresh fruit bunches for a seven-year plantation in India is 16-17 tonnes per hectare, while it is 24-25 tonnes in Malaysia and Indonesia. In India, the oil recovery rate is 17.5 per cent, while in Malaysia and Indonesia it is 19-19.5 per cent.

The higher recovery in Malaysia and Indonesia is because the plantations are over 10 years and most of the plantations are owned by the companies and not under contract farming. “As a result, the companies are able to follow strict management practices, which is difficult for our farmers to follow,” he said.

Oil palm is grown under contract farming in India under a tri-partite arrangement between the farmer, the miller and the State. The Oil Palm Act mandates a command area system enabling farmers from a particular area to supply to a designated miller like in the case of sugar industry, prior to decontrol.

Published on August 19, 2021

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