Becoming ‘Atmanirbhar’ in edible oils

AS Mittal | Updated on August 10, 2021

Forex pressures Increasing palm cultivation is the need of the hour   -  AJ Vinayak

The forex saved from the cutting the import bill can go in boosting farmers to cultivate edible oilseeds

The country’s dependence on imported edible oil has pinched the pocket of ordinary citizens as the spike in prices are at an all-time high .

Recently Prime Minister Narendra Modi launched a ₹11,000-crore National Edible Oil Mission-Oil Palm (NEMO-OP) to make India self-reliant in edible oils. The Prime Minister has been for a while emphasising that the forex savings from reduced edible oil imports can be spent on encouraging farmers to take up palm and oilseeds cultivation in a big way.

The government shelled out about ₹75,000 crore to import 13.50 million tonnes of edible oil in 2020-21. The trend for the current fiscal points to an import bill of ₹1 lakh crore, which will be an all-time high.

India is already the world’s largest importer of edible oil with a share of 20.7 per cent, followed by the EU (13.5 per cent) and China (12.8 per cent). As the second-largest consuming country, India needs about 25 million tonnes of edible oil a year to meet its domestic requirements. About 10 million tonnes of edible oil is produced domestically from primary — soybean, rapeseed and mustard, groundnut, sunflower, safflower and niger — and secondary sources — palm oil, coconut, rice bran, cotton seeds and tree borne oilseeds. The remaining 60 per cent of requirement is met through imports.

The dependence on imported edible oil is a huge drain on foreign exchange reserves. The share of palm oil is about 60 per cent of the import bill, worth about ₹45,000 crore, followed by soybean oil with a share of 25 per cent and sunflower 12 per cent.

Palm oil plans

Under NEMO-OP, the government will work towards boosting cultivation of oil palm to 10 lakh hectares and 16.7 lakh hectares by 2025-26 and 2029-30 respectively, spread across 19 Southern and the North-Eastern States.

However, India has currently only about 3.3 lakh hectares in 16 States under oil palm cultivation. According to the Union Agriculture and Farmer Welfare Ministry, the country has consistently increased its palm oil production over the last six years from — 1.91 lakh tonnes in 2014-15 to 2.79 lakh tonnes in 2020-21.

The government is targeting to ramp up domestic production of palm oil by over three times to 11 lakh tonnes by 2025-26 to cut down the country’s imports.

Oilseeds output has increased to 37.31 million tonnes in 2020-21 from 27.51 MT in 2014-15, while the area under cultivation has also gone up to 28.82 million hectares from 25.99 million hectares during this period,. But this is still not enough to reduce India’s annual edible oil import bill.

The Minimum Support Price (MSP) system for oilseeds has failed due to low procurement by government agencies. As the procurement of pulses on MSP has been increased, the government should also ensure the procurement of oilseeds to encourage farmers towards the cultivation of oilseeds.

India’s success story of achieving self-sufficiency in pulses, must be replicated in the cultivation of oilseeds and palm oil too. Against a requirement of 30 million tonnes of pulses per year, India now imports just four million tonnes of pulses to meet its domestic demand.

According to Union Agriculture Minister Narender Singh Tomar, “the government has saved ₹15,000 crore annually reducing the dependence on import for pulses. The production of pulses has gone up from 14 million tonnes to 24 million tonnes during 2014-20.”

The challenges ahead

In 2000, palm oil consumption in the country was 3 million tonnes. It was about 11 million tonnes in 2020-21, a growth of about 400 per cent in the last two decades. The largest exporters of palm oil are Indonesia and Malaysia, where conditions like farm size, socio-economic conditions, the system for agriculture and environmental conditions are completely different from India.

One stark difference is the disparity in the farm size of the plantation. In Indonesia, plantations usually span over 4,000-5,000 hectares with a processing plant on the site. They are usually owned by corporations and make up nearly 70 per cent of the area under oil palm.

Another vital difference is related to water availability. Oil palm is a water-intensive crop and is more suited for cultivation in rain abundant regions. In oil palm growing regions of Andhra Pradesh where the annual rainfall is between 800 and 1,000 mm, irrigation needs are met through groundwater.

To achieve the goal of making the country self-reliant in palm oil production, we need to attract corporate bodies towards palm oil production and derive maximum benefit of 100 per cent foreign direct investment. The States’ wasteland, degraded land, and other lands can be given on lease, rent or bought by private entrepreneurs, cooperative bodies or joint ventures for oil palm plantation. A combination of individual farming, contract farming and captive plantation can boost oil palm cultivation in the country.

The way forward

Currently, we produce 37.31 million tonnes of oilseeds from 28.82 million hectares of land. Even if 10 per cent of the area of cultivation is diversified for palm oil plantation, the oil produced can be increased eight times. Palm cultivation has enormous potential as one hectare can give about 4,000 kg of oil as against 500 kg of oil in the case of sunflower, coconut, and rice bran.

Farmers need to be nudged and incentivised to cultivate oil palm and oilseeds. For oil palm, they should be compensated at least for six years for their land against the potential loss and should also be provided with a one-time irrigation subsidy.

This way India can reduce its dependence on imports from Malaysia and Indonesia. It will also help us save foreign exchange to empower our own country’s farmers. The need of the hour is to minimise our dependence on imported edible oil.

We have already identified a potential area of one million hectares for palm cultivation, and this has to be consistently increased, which will be a decisive step towards ‘Atmanirbhar Bharat’ in edible oil.

The writer is Vice-Chairman, Sonalika Group; Vice-Chairman (Cabinet Minister Rank) Punjab State Planning Board; Chairman-ASSOCHAM (Northern Council)

Published on August 10, 2021

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