Oilseeds production in India has increased from 186 lakh tonne in 1990-91 to 253 lakh tonne in 1998-99 and yet the industry could face a gradual death in the next four-five years because of cheaper imports from Malaysia.
With liberalisation of the market in 1990-91, when India signed the GATT, import duties on edible oils were slashed. This brought in cheap edible oil such as palm oil from Malaysia and the domestic market faced the competition it was never ready to handle.From about 2 lakh tonne in 1990-91 the imports in 1998-99 reached almost 44 lakh tonne.
The gap between demand and supply as stated by the department of civil supplies is 1.5 lakh tonne. This has put immense pressure on the market as growers fight against cheaper products and try to bridge the demand-supply gap. In addition, the market has an excess-capacity which makes the solvent extraction factories run at 33 per cent of its installation capacity. But the reason why India edible oil fails to combat external competition is far more basic.
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In India only the semi-arid or the barren land is used to produce oil seeds as fertile lands go to rice, wheat, or sugarcane production. This brings down the productuvity. Also the oil extracting technology is not modern and a lot of oil is left in the cake.
The farm holding size is small or marginal, one to two acres, and the farmers keep shifting from crop to crop.
"India was self sufficient in edible oil and in 1990-91 we had achieved self sufficiency upto 97 per cent. Since then, though our produce has increased, the level of self suffiency has gone down. At present it is at 61 per cent," said D V Prasad, managing director, Karnataka Oil Seed Growers Co-operation.
"The government wanted to make sure that the consumers get oil at a cheaper rate. If the cost of producing palm oil in Malaysia is Rs 7 per kg then the same will cost Rs 25 per kg in India. The market thus faces alot of pressure. If we produce about 25 million tonne then we have the capacity to produce 40 to 50 million tonne of vegetable oil. Also about Rs 50,000 crore has been invested in the solvent extraction industry, which run at 33 per cent capacity," Prasad added.
Though the problems in these industries are large, there is no body to get the government's attention. Most of the farmes are small and the farmers are too disorganised to loby for there needs. And most of them shift to maize or other dry crops if they find that the market is down.