As edible oil consumption and demand are ever-increasing, the oil palm industry in India has emerged as a sector of growth with positive returns for growers and processing companies. The rural economy in the oil palm operating zones across various states has also improved. Growers who supply fresh fruit bunches (FFB) of oil palm (OP) to the processors have received payment and registered a growth of the weighted average price of FFB with a CAGR of 23.3 per cent during the oil year (November to October) 2017-18 to 2021-22, whereas area under OP and FFB volume grew by CAGR 3.3 per cent and 7 per cent, respectively, during the period.   

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Over the three decades that ended in 2018-19, the progress of bringing the area under OP and its productivity was slow and poor, though a strong foundation has been laid in this first phase of the planting cycle. However, the strong measures taken by the Ministry of Agriculture and Farmers Welfare (MoA), Government of India (GOI) through the introduction of the National Mission on Edible Oils – Oil Palm (NMEO-OP) in August 2021 accelerated the activities to some extent, eventually reflecting the increase in oil extraction ratio, area coverage and productivity etc. And this is evidenced specifically in Andhra Pradesh, Telangana and part of the Northeast.  According to MoA and GOI, the coverage under OP is projected to grow from FY21-22 to FY25-26 at a CAGR of 21 per cent to reach around one million hectares (mh). However, this may not be easy for the oil palm industry, keeping in mind the availability and quality of planting material and market response. 

Price voltality

The important and significant aspect is the price of crude palm oil (CPO), which is highly volatile in nature. High prices of CPO will have a positive impact on both new and existing growers to bring more area under OP through crop conversion and otherwise vice-versa. In the last three financial years, there was an unprecedented rise in the price of CPO which led to high prices of FFB. The Covid pandemic and post-pandemic followed by Russia- Ukraine war have had a severe impact on the prices of agricultural commodities including edible oils and pushed the prices of edible oils to a record height, to the extent of 30 per cent on an average, prior to Russia–Ukraine war. Whether such an extraordinary price of CPO and other vegetable oils will sustain or not is an uncertainty that will remain in the mind of all stakeholders, especially growers who are concerned about the price of their produce (FFB) despite FFB price assurance given by MoA and through NMEO-OP. In the case of new farmers in various states (other than Andhra Pradesh and Telangana), the mental block is huge as they feel it would be a recipe for disaster , so far as crop conversion is concerned. 

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Under such circumstances, the oil palm industry must ensure that remunerative prices are paid to farmers for FFB. The payment should continue even when the price of CPO falls, irrespective of signing a memorandum of understanding as per NMEO-OP by the States with the GOI or not. This is possible to manage well by the processors through research capability towards downstream and value addition and tracking the market dynamics and drivers. The time has come for the industry to realise that there is an extreme need to shift the paradigm of focusing on profit only, rather than developing benefit sharing mechanism. This will enable the corporates to make their own pitch favourably in the long run. 

The Government projected edible oil production in the country during 2021-22 to 2030-31 to register a CAGR growth of 6 per cent to reach around 23 million tonnes in 2030-31. It is also anticipated that edible oil demand in the country by 2030-31 may go up to 30 million tonnes or more. Still, there will be a deficit of 7 million tonnes. Growing oil palm and growing with oil palm through farmers under micro-irrigation is the best option in the country to bring a yellow revolution, with oil palm being the highest oil producer crop per hectare per year. This can be achieved by bringing more areas under cultivation through farmers on cluster basis.   

(The author is former CEO-Oil Palm Plantation, Godrej Agrovet Ltd., Views expressed are personal.)