Import risks

Policy support can increase edible oil production

The supply crunch and consequent price spike in vegetable oils in the international market are set to pose formidable problems for India, which relies heavily on imported edible oils to meet its needs. The current global edible oil crisis, triggered by the disruption in sunflower oil supplies from Russia and Ukraine and below-par global production, has been exacerbated by the ban on palm oil exports by Indonesia, the world’s largest producer of this oil. The bulk of India’s cooking oil imports are of palm oil, nearly half of which are sourced from that country.

The prices of various edible oils, including palm oil, have surged in the global market by 20-40 per cent since February, when the Russia-Ukraine war broke out. The domestic prices of cooking oils, too, have been escalating in tandem. Though an official statement issued on Sunday maintained that the domestic edible oil availability is comfortable despite the Indonesian ban, the unabated uptrend in prices belies this claim. The situation remains worrisome also because of the reduction in soybean oil imports from Argentina and Brazil and increase in export taxes by many other countries. Besides, Malaysia, the other major exporter of palm oil, cannot be expected to augment the supplies overnight to cover the gap created by Indonesia’s withdrawal from the market. Apart from India, its immediate neighbours, notably Pakistan and Bangladesh, whose dependence on palm oil imports is critical, are also seeking to procure larger quantities from Malaysia.

India’s perpetual reliance on edible oil imports can be attributed chiefly to the failure of local output to keep pace with growing requirements. While the edible oil demand has swelled annually by around 6 per cent, production has risen by only 2 per cent. The flawed government policies, tilted heavily towards the consumers, have also contributed to this. Farmers often do not get even the officially determined minimum support prices. They have little incentive to invest in yield-enhancing inputs. In fact, the cultivation of oilseed crops has gradually been pushed to marginal lands. Hardly one-fourth of the oilseed acreage has facilities for irrigation. The use of plant protection chemicals, too, is meagre. Consequently, the crop yields are rather low. This is evident from the huge difference in crop yields on farmers’ fields vis-a-vis the potential yields that can be obtained with the available production technology.

The present average productivity of nine commonly grown oilseeds — groundnut, rapeseed-mustard, soybean, sunflower, sesame, safflower, niger, castor, and linseed — is roughly around half their potential yields. There are substantial variations in crop yields in different states as well. While the national average productivity of oilseeds is around 1,265 kg a hectare, the mean yield in Tamil Nadu is as high as 2,310 kg. Thus, overall production can be almost doubled by just bridging this yield gap. Fortunately, this is not an undoable task. The technology — high-yielding crop varieties and improved agronomic practices — required for this purpose is already available. The need is to transfer it to the farmers and assist them to put it into practice. But this measure alone would be of little avail unless it is backed by effective price and marketing support. Otherwise, the supply glitches of the kind the country is facing now would be hard to stave off.