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Strategies to boost edible oil output won't succeed sans firm purchase plan

Despite MSP spike and higher acreage and yields, India's dependence on imported cooking media has only grown

edible oil, edible oil import
Sanjeeb Mukherjee New Delhi
5 min read Last Updated : Jan 05 2022 | 9:13 PM IST
To lower India’s rising dependence on imported edible oils, the government has, for quite some time, been working on a multi-pronged strategy, the cornerstone of which is announcing a higher Minimum Support Price (MSP) than that for cereals, and improving the procurement of oilseeds whenever prices crash.

Of late, there has also been a renewed focus on expanding the area on oil palm and boosting the production of rice bran oils towards this end.

The immediate trigger might have been a surge in domestic edible oil prices, but steps to boost local oilseed production have been taking place for a long time.

However, despite all the measures, India’s reliance on imported edible oils has continued to grow, raising a question mark on both, ongoing and past initiatives to boost domestic production.

A major drawback of most of the schemes and programmes to boost oilseed production is that unless it is supplemented by a strong procurement system that ensures some sort of guarantee on investments made by farmers, a big switch does not happen.

MSP and oilseed production

Data shows that though both the acreage and production of oilseeds have risen significantly during the past few years due to higher MSP, it has not come at the cost of rice and wheat production.

Between 2014-15 and 2020-21 (July to June), when the MSP of paddy (common) was hiked by almost 37 per cent, the acreage under the crop dipped marginally, by about 2.5 per cent.

And while the MSP of wheat increased by 36.2 percent during the same period, there was a 10 per cent increase in the area under its  cultivation.

In contrast, between 2014-15 and 2020-21, the area under soya bean cultivation rose by nearly 10 per cent on the back of a 51.5 per cent spike in MSP.

In other words, though higher MSPs may have encouraged farmers to grow more oilseeds along with pulses, there has been no simultaneous shift away from wheat and paddy.

Experts say that unless backed by strong procurement mechanisms or ready markets, MSPs alone are not enough to encourage farmers to leave cereal cultivation and opt for either oilseeds or pulses.

In the past few years, India’s pulses production has risen from a mere 14-15 million tonnes to almost 22-23 million tonnes not just due to higher MSPs, but also because of an assured procurement system by state agencies.

This year too, India’s mustard seed production is expected to jump manifold as prices in the open market for oilseeds have been remunerative for farmers.

Another case in point on the role prices play in luring farmers towards a crop.

In this, the performance of the much talked about Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA), which lays down a framework of Central intervention in case oilseeds, pulses and coarse cereal pulses fall below MSP, has come under question.

In a recent price report, the Commission for Agriculture Costs and Prices (CACP) said that the allocation for PM-AASHA has significantly declined from Rs 1,500 crore in 2019-20 to Rs 400 crore in 2021-22, while expenditure under the scheme has been extremely low.

“The scheme has great potential of benefiting the farmers but there is an urgent need to review PM-AASHA and address implementation issues,” the report said, recommending the government to form a Committee composed of representatives from Central and State Governments and private sector to review the Scheme and recommend changes to make it effective.  

CACP also found that despite significant increase in procurement of pulses and oilseeds during the last few years, market prices have remained subdued.

It also called upon state governments to be more proactive as it is often seen that the sanctioned quantity is lower than the procurement limit of 25 percent production in oilseeds and pulses, while actual procurement is much lower than the sanctioned quantity.

Oil Palm Mission

The second major initiative announced recently is the revamping of the Oil Palm Mission with the objective of producing 2.8 million tonnes of palm oil locally by 2025-30.

However, even if the mission succeeds, it will not significantly lower import dependency.

The Solvent Extractors Association (SEA) in a recent presentation said that by 2025-26, India’s domestic edible oil demand will be around 26 million tonnes, of which just around 13 million tonnes will be met through domestic production of oilseeds.

Therefore, import reliance will continue to be 12-13 million tonnes even in 2025-26, the SEA said.

Rice Bran Oil

The third major way in which policy makers are looking to boost domestic edible oil availability is by raising rice bran oil production from the current 1.0-1.1 million tonnes per annum to 1.8 million tonnes.

However, taking the production beyond the targeted 1.8 million tonnes so that it makes some tangible impact on the domestic edible oil availability is a big challenge as trade sources said that for it to happen domestic rice production has to grow manifold.

India at present produces around 120 million tonnes of rice in a year and taking it beyond the same looks challenging.

Estimates show that from 1 metric tonne of paddy, just around 1.6 per cent is crude rice bran oil is extracted and when refined this further goes down to 1.4 per cent.

Therefore, for rice bran oil production to grow beyond 1.8 million tonnes per year is a big challenge.

Thus in short, overall India’s big import dependency on edible oils will continue for some time to come unless of course there is a big revolution in domestic oilseeds cultivation.


Topics :edible oil oilseedsMSPPalm oil imports

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