Low duties, inadequate incentives keep the target slippery for edible oils

The new pursuit of self-reliance offers India’s edible oil industry a good opportunity to do away with the heavy reliance in imports. How is it that a country which has emerged as a major exporter of several agricultural commodities, including rice and cotton, will continue to be around 70 per cent dependent on imports of oils for human consumption? India is also a major importer of vegetable oils for making cosmetics, oleochemicals and medicines.

India’s oil marketing year runs from November to October and during 2018-19 vegetable oil imports were up 3.5 per cent to 15.55 million tonnes (mt), including 14.913 mt of edible and 636,159 tonnes of non-edible varieties. Such high levels of imports were required to take care of the country’s annual requirements of 23 mt.

The trend cannot but raise the hackles of local oil refiners who over the years have built capacity of over 30 mt. As Atul Chaturvedi, president of the Solvent Extractors Association of India (SEAI) says: “No nation can afford to compromise on its edible oils security to the extent of almost 70 per cent of its annual requirements.”

Assuming that the urban lifestyle will return to normal in the post Covid-19 pandemic, Indian use of cooking oils will record an annual growth rate of 3 to 4 per cent, according to industry officials. The OECD-FAO report on agricultural outlook up to 2027 says as India’s per capita consumption of oils climbs to 24 kg by 2027 from the present around 15 kg, total consumption will rise to 37 mt from an estimated 23.6 mt in 2019-20.  This substantial growth in oils use, according to the report, will likely be filled by both an expansion of domestic production and a further increase in imports of mainly palm oil from Indonesia and Malaysia.

The report is pinning much hope on domestic supply meeting a significant portion of incremental domestic re­qui­rements. But the low import duties on cooking oils have proved to be a disincentive for farmers to focus on growing oilseeds, says Cha­tur­vedi. No wonder, then, that domestic supply of oilseeds has been stagnant despite growing local oils use. The oil palm area expansion programme and the national mission on oilseeds and oil palm are among the major attempts in recent years to boost oilseeds production.

 

The country has also been experimenting with inter-cropping of oilseeds with cereals, pulses and sugarcane intended to enhance income of farmers. India gets indigenous cooking oils from the seven mainline oilseeds — groundnut, soybean, sunflower, sesame, rapeseed, safflower and copra — and  from secondary sources such as cottonseed, rice bran and tree borne oilseeds. But inadequacies of transfer of technology and research and extension activities have allowed marginal improvements.  
 

According to Govindbhai G. Patel, managing partner of GGN Research, oilseeds production from Kharif and Rabi crops will increase from 23.12 mt in 2018-19 to 24.26 mt in 2019-20. As a result, the availability of oils from do­mestic sources during this period will rise to 4.9 mt from 4.5 mt. Improvement in local supply is mainly on account of higher production of groundnut and rapeseed. Oils supply from secondary sources will also be better at 3.08 mt in the current season from 2.79 mt in 2018-19. Therefore, total domestic edible oils availability in the season ending Oc­tober will be higher at 7.94 mt against 7.3 mt last year. Ahead of the outbreak of Covid-19 pandemic, Patel estimated that India will have to import 15.63 mt cooking oils this oil year against 15.06 mt in 2018-19.

Now, however, all these projections will have to be revisited. B V Mehta, executive director of SEAI, says the long shutdown of hotels, restaurants and cafeterias will have an impact on demand as the sector accounts for 40 per cent of cooking oils use. At the same time, imports have slowed. When things return to normal, the challenge will be to progressively raise self-reliance in edible oils.

We need a roadmap for that. Ag­ricultural economist and former chairman of Commission for Agricultural Cost and Prices Ashok Gulati has been campaigning for many years for large-scale palm tree cultivation to substantially raise production and curb imports of edible oils. This is because the palm tree “is the only plant that will yield 4 tonnes of oil per hectare, while you don’t get even 400 kg from other oilseeds.” If attempts are to be made to attain large degrees of self-reliance in edible oils through traditionally grown oilseeds and not the palm tree, then at least 30 million (m) additional hectares at the current level of oilseeds productivity will have to be found. This is not within the realm of possibility.

Gulati has identified 2 m hectares where palm trees can be grown. But it has taken the country many years to bring about 50,000 hectares under oil palm cultivation. Since the country already has nearly 55 per cent of total land under agriculture and urbanisation and industrialisation continue to make claims on land, it will be nearly impossible to find new large spaces for palm tree growing. There is, however, good scope to transfer land from oilseeds crops such as rapeseed and sunflower and also from staple food crops to oil palm cultivation. A suggestion is floated that regions producing surplus food crops could make room for oil palm plantation.

This is one crop that demands the participation of corporations. But that can happen when the government starts treating oil palm as a plantation crop instead of a horticulture crop. Oil palm has a gestation period of up to six years when trees start bearing fruit. On attaining maturity, the trees give fruit for the next 27 years. Only corporations could wait that long to reap benefits from their investments.