The Union Cabinet approved ₹11,040 crore on August 18, 2021, to kickstart the National Mission on Edible Oil-Oil Palm (NMEO–OP). The Centre’s share in this is 80.11 per cent and States’ share is 19.89 per cent.

The scheme is aimed at covering an additional 6.5 lakh hectares (ha) area under oil palm cultivation by 2025–26 to touch 10 lakh ha, mainly in the North-East region and Andaman & Nicobar Islands (ANI).

Indian Institute of Oil Palm Research estimates the country’s oil palm cultivation potential at 28 lakh ha. Under the mission, production of palm is expected to increase 11.20 lakh tonnes by 2025-26 and 28 lakh tonnes by 2029-30.

Though is a welcome move in meeting edible oil demand, there concerns raised over environmental and biodiversity issues in the regions earmarked for oil palm production. We take a different view to support this move and discuss its benefits.

Despite 2020 being an exceptional year due to the Covid impact resulting a drastic decline in industrial production , palm oil consumption was well above 7.5 million tonnes. Palm oil has varied application in cooking, baking, cosmetics, animal feed, oleochemicals, and has recently been identified for use as vegetable oil in biodiesel. The government’s policy push has to be seen in this context.

The Indonesian saga

India is currently the largest importer and the second-largest consumer of palm oil globally. However, it has lagged Nigeria, Guatemala, and Papua New Guinea in palm oil production. India imports about 7.1 million tonnes of palm oil (55 per cent of 13 million tonnes of edible oil imports). India imports palm oil from Indonesia and Malaysia, which account for 85-90 per cent of the world’s palm oil production. So, it is crucial for India to adopt appropriate policy measures to promote palm oil industrial clusters for sustainable production and reduce imports.

Palm oil is known as the ‘golden crop’ in South-East Asia. It has played a significant role in the nation-building for Indonesia and Malaysia. On average, 2.5-3 tonnes of more oil can be extracted from oil palm as compared to sunflower, soyabean, and rapeseed, that yield roughly 0.5, 0.4, and 0.7 tonnes of oil per hectare, which is about 4-7 times higher. With its lipid profile rich in mono and polyunsaturated fatty acids, palm oil is suitable for the cholesterol conscious users.

With the continued demand and high imports dominated by Indonesia and Malaysia, edible oil industries, and entrepreneurs can learn lessons from these countries.

Indonesia’s prominence in palm oil production can be traced back to 1960 when the Indonesian government tied up with the World Bank to develop rural areas and offered lands to private investors at a subsidised rate.

In early 1980, the Indonesian government initiated a programme to integrate farmers with available lands of fewer than two hectares and started offering financial incentives to poorer residents. None of the foreign licensing companies was given land ownership. However, the government promoted farmers’ groups to form cooperative societies. With reasonable investment in research and development to improve seeds and soil quality, pest control, and focus on integrating upstream and downstream chain actors, investments in palm oil proved successful and positioned Indonesia as a leading producer and exporter of palm oil.

The economics of oil palm business is particularly beneficial for Asia’s densely populated nations. For example, a farmer (with less than 20 tonnes of fruit per hectare; considered low yield in Indonesia) earns an average of $550 per month from oil palm production compared to a minimum wage of $80 per month in an alternative employment.

NMEO-OP’s plus points

With the launch of NMEO, the government’s intention is to focus more on areas available for oilseeds and oil palm cultivation. Ensuring assistance to seed gardens for the North-East and ecological hotspots like Andaman and Nicobar Islands will help India’s peripheral regions to contribute to Gross Value Added (GVA) after 4-5 years of planting.

The mission will offer farmers an assured fixed price like the MSP and in case of price fluctuations, farmers will be paid the price difference between modal price and MSP.

NMEO–OP will support planting material assistance from ₹12,000 per ha to ₹29,000 per ha. However, market intervention scheme is to be put in place to control palm oil retail price.

Second, the NMEO-OP move will strengthen the entire value chain from farm to fork. Asian Agri is the largest producer and processor of oil palm, and employs one worker for every seven hectares of land. Every year oil palm cultivation requires one tonne of fertiliser per hectare.

To make efficient use of fruit bunches, these must be shipped for primary processing and crude palm oil production in mills. And this should happen just after plucking. It delimits the concentration of fatty acid to 2 per cent since the fatty acid is undesirable if it is above 5 per cent in concentration.

So, this requires setting up processing units closer to farmgate, which can reduce seasonal unemployment. To minimise post-harvest losses, the government needs to build facilities that can integrate production, processing, and distribution, and promote growers’ income generation.

Third, NMEO will also help set up processing units to remote regions and reduce out-migration to major cities. However, there should be renewed interest in land use policy given the scope of ground water recharge. In other words, food should be grown naturally so that the local environment can support the production system.

To conclude, Roundtable for Sustainable Palm Oil is the guiding authority in certifying sustainable oil palm production.

There are recommendations for economic, environmental, and social standards which need to be met for sustainable production.

Dey is Chairman, Centre for Food and Agribusiness Management, and Gairola is Executive FPM Scholar (Agri) of IIM Lucknow. Views are personal