Making palm oil a ‘sustainable’ crop

Tanu Singh | Updated on October 28, 2019

Palm oil is an incredibly efficient crop, producing more oil per land area than any other vegetable oil crop   -  Reuters

Rather than spending time to develop environmental and social criteria, India could use the existing global norms for imports

The Malaysian Prime Minister’s allusive remarks on Kashmir have added a new controversy to the already turbulent world of palm oil. Indonesia and Malaysia, the two largest producers, are already facing allegations of destruction of the world’s most bio-diverse forests to grow oil palm.

Other charges relating to the activities subsequent to deforestation and destruction of wild habitat, such as land clearing for plantations, release of mill effluents, burning and haze have been triggering debate about the environmental and social impacts of palm plantation.

India being the largest consumer of palm oil has a considerable stake in securing sustainable supply and it is high time such issues are addressed.

Palm oil comes from the fruit of oil palm trees and can be obtained either from the fleshy fruit or from its kernel. Oil palm trees are native of Africa and were brought to Indonesia and Malaysia as ornamental plants. Palm oil is an incredibly efficient crop, producing more oil per land area than any other equivalent vegetable oil crop.

It is an important crop for many countries where millions of farmers depend on producing palm oil for their livelihood. The fact that palm oil is also the common ingredient in packaged food, shampoo, toothpaste and cosmetics, makes the impact of the biofuel far bigger.

The world export of palm oil in 2018 was $30.35 billion. Indonesia and Malaysia are the major exporters with exports of $26.2 billion and $14.9 billion, respectively.

As much as 86 per cent of the world’s requirement of palm oil is fulfilled by these two countries. The major importers are India, China, Pakistan and the Netherlands ( it is used as a biofuel the Netherlands).

How can we make palm oil plantation sustainable with minimum harm to the environment? This calls for devising a sustainable framework across the palm value chain. It means having a set of environmental and social criteria at each stage of the value chain which must be complied with in order to produce sustainable palm oil. The palm oils thus produced would be certified ‘sustainable palm oil’.

The certification norms would ensure adequate protection of the environment and the local communities. RSPO (Roundtable on Sustainable Palm Oil) is one such global effort that represents third-party standard for the more sustainable production of palm oil.

The Indian scene

The production of palm oil in India started in 1991 with five thousand tonnes which increased to two lakh tonnes in 2018. The current consumption of palm oil is more than 9.3 million tonnes, which is expected to double by 2030. Since the domestic production is limited, large scale imports are inevitable.

About 90 per cent of the palm oil is used as cooking oil and the rest in personal care and cosmetics. The major cooking oil users are the government (for public distribution), hotels and restaurants, middle-class consumers (use branded blends) and lower middle-class consumers (use ‘loose’ or unbranded palm oil).

As palm oil producers, Indonesia and Malaysia have come up with their own version of RSPO, tweaked to their national requirements, to be a part of this sustainable initiative. India needs to take on that mantle as the user industry. Let us look at how it can be done.

Imports: A customs duty benefit can be apportioned for sustainable palm oil. Since there is a high dependence on palm oil, the import requirements could be strengthened over five to eight years with further consignment-based restriction for non-sustainable palm oil.

The major stakeholders across the production value chain are: small and large farm-holders, millers, refiners and end-users. Now if sustainability is to be ensured across the value chain, all the stakeholders will have to adhere to the environmental and social standards/criteria.

Rather than taking time to develop environmental and social criteria, India could use the existing global criteria that have been internationally developed and adapt them to the Indian requirements.

Development of infrastructure: A phased application of these measures may start from one end of the value chain. However, before directly jumping into implementation, a year or so could be devoted to modifying ‘sustainability criteria’ and building support infrastructure responsible for its implementation.

Producers: Once infrastructure is ready, all farm-holders could be brought into the loop of producing sustainable palm oil aided by the government.

Big corporates who are already contributing to sustainable palm oil could adopt small/large farm-holdings and develop them under their CSR initiatives.

Millers and refiners: Since the produced palm oil will call for a premium in the market, a discount/subsidy could be given to them for purchasing sustainable palm oil from the producers.

The percentage of sustainable palm oil that they purchase could be mandatorily increased over time till the input to the mills and refineries is 100 per cent sustainable.

The government will also need to ensure that palm oil being distributed through the public distribution system is sustainable without passing on the cost to beneficiaries.

However, one of the challenges would be converting ‘loose’ or unbranded palm oil to sustainable palm oil. This category will be the last in the segment to be converted to sustainable palm oil and will be market driven.

With high import dependence, bringing the domestic production chain to manufacture sustainable palm oil will be possible only if the compliance cost outweighs the cost of imports.

It is clear that a timeline for implementation of a sustainability framework for palm oil must be drawn. A campaign for making consumers aware of the need to consume ‘sustainable’ palm oil would be a must for making the initiative successful.

The writer is an Indian Trade Service officer. The views are personal

Published on October 28, 2019

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