Commodity Analysis

Long-term solution to the oilseeds puzzle

Radhika Merwin | Updated on January 11, 2018 Published on July 16, 2017

BV MEHTA, Executive Director, Solvent Extractors’ Association of India


Focus more on productivity than prices, says B V Mehta, SEA

A bumper crop in oilseeds has led to a steep fall in their prices that are 20-30 per cent lower than the minimum support price (MSP) set by the Centre. Ensuring that farmers do not lose interest in oilseeds cultivation is important. A long-term solution lies in improving the productivity of the farmer rather than just the price, says B V Mehta, Executive Director, The Solvent Extractors’ Association of India. Excerpts:

Despite being one of the largest producers of oilseeds in the world, India’s import dependence has only doubled over the past few years. Why?

Our per capita consumption is 16 kg/per annum per person which is quite low in comparison to developed countries, where the consumption is 50-60 kg. Our consumption is also much below the world average of 27/28 kg.

But given our population of 1.3 billion people, our total consumption is 21-22 million tonnes of edible oil, against just about 7 million tonnes of production. So, to bridge the gap between consumption and production, we have to rely on imports.

In the current year (2016-17), farmers are dealing with the problem of plenty. This has led to oilseeds being sold 20-30 per cent below MSP. How do we ensure that farmers don’t move away from oilseeds production next year?

Three years back, we had a bumper groundnut crop. At that point in time, the MSP was around ₹4,000/quintal and the price at the mandi went down to ₹3,200/quintal. There was hardly any market intervention operationby NAFED and other agencies to stabilise prices. In a distress-sale scenario, farmers were forced to sell at ₹3,200/quintal. In the following year, nearly 2 lakh hectare in Saurashtra moved from groundnut to cotton.

The same issue is plaguing the market now. 2016-17 was a bumper year for oilseeds not only in India but also globally. Hence, oilseeds are being sold below the MSP. There is hardly any market intervention operation in the mandi, where the government agencies can step up buying if the price falls below the MSP. With sowing time nearing, farmers are contemplating shifting to alternative crops.

Ensuring that farmers do not lose interest in oilseeds cultivation and receive remunerative price for their produce is important.

The short-term measure would be to raise import duty, thus offering some buffer to the domestic farmers. With increase in import duty, the price of oil/oilseeds in the domestic market gets a leg-up and farmers, in turn, get a remunerative price for their produce. However, a long-term solution lies in improving the productivity of the farmer rather than just the price.

Last year, the SEA developed 70 model farms of castorseed in Gujarat. Productivity improved from 1,500-1,800 kg/hectare to 2,500-4,000 kg/hectare. This time SEA is developing 200 model farms for castor seed across Gujarat to demonstrate to the farmers how productivity can be increased.

By improving productivity, the farmer is insulated from a fall in prices to some extent. Ultimately, the aim should be to increase return per hectare and not price.

Going by estimates, the production of edible oil has been higher by at least about 30 per cent in 2016-17. Yet, imports are expected to be at the same level as last year. Why?

Demand is rising by 5-5.5 per cent every year, thanks to rising middle-class income and growing population. To meet the growing demand, we need about 1 million tonnes extra every year. In 2016-17, given the increase in oilseeds production, the additional edible oil production should ideally take care of this additional demand.

But sadly, today, oilseeds are lying in farms and godowns, not being crushed due to disparity. In fact, we may end up carrying the largest stock at the end of the season.

Hence, we may not crush the entire 1.2-1.3 million tonnes from the additional crop of 3.5 million tonnes produced last year and again end up importing about 14 million tonnes of oil in 2016-17. However, this is lower than the 14.5 million tonnes imported in 2015-16.

The SEA has proposed to the Centre to set mustard oilseed production target of 15 million tonnes by 2025, thereby doubling farmers’ income. Why is mustard oil seed production crucial?

Mustard crop is sown on about 6 million hectares i.e. 82 per cent of total oilseed crop during rabi season but productivity is about 1.2 tonnes per hectare, which is very low compared to international standards. With appropriate technological intervention, increase in productivity is feasible.

There is no other oilseed crop which can address the diversified challenges of food security, animal nutrition, conservation of water and soil and foreign exchange better than mustard crop. The cost of production is also low compared to other crops in the same season.

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Published on July 16, 2017
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