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EXPLAINED: Why PM Modi Wants India To Become Atmanirbhar In Palm Oil Production

By: News Desk


Last Updated: August 18, 2021, 17:56 IST

The meet at the auditorium of the Rashtrapati Bhavan lasted for nearly five hours. (File pic of Prime Minister Narendra Modi)

The meet at the auditorium of the Rashtrapati Bhavan lasted for nearly five hours. (File pic of Prime Minister Narendra Modi)

India imports more than half of its annual edible oil need, which makes it a ripe area for stepping up production for the benefit of farmer and consumers alike

India is the world’s largest edible oil importer, depending on the likes of Malaysia and Indonesia to meet about 60 per cent of its annual need. But efforts have been on to change that by encouraging the farm sector to step up cultivation of oil palms. The Centre has okayed the 11,040-crore National Mission on Edible Oils-Oil Palm (NMEO-OP) days after PM Narendra Modi called on farmers to make India “atmanirbhar” in edible oil production. Here’s what you need to know.

How Much Edible Oil Does India Import?

The annual demand for edible oil in India is of about 25 million tonnes of which the country had imported a little over 13 million tonnes in the 2019-20 (November-October) period. The bulk of the imports comprised palm oils, which reportedly accounted for 55 per cent of the shipments coming in.

“While India has become self-sufficient or Aatmanirbhar in production of rice, wheat and sugar, but it was not enough as the country is dependent on huge imports of edible oils,” Modi said on August 9 after virtually releasing the ninth instalment of Rs 19,500 crore to 9.75 crore beneficiary farmers under the PM-KISAN scheme.

The call to augment palm oil production acquires urgency at a time when retail prices of edible oils have kept displaying an upward trend over several months. The government told Parliament last month that average prices of edible oils had risen by up to 52 per cent year-over-year in July 2021.

Announcing the scheme — for which the Centre would be putting up 80 per cent of the outlay — a Union Cabinet release on August 18 said that it will have a special focus on the Northeastern region and the Andaman and Nicobar Islands. It has a target of achieving oil palm coverage of 10 lakh hectares and that the “production of crude palm oil (CPO) is expected to go up to 11.20 lakh tonnes by 2025-26 and up to 28 lakh tonnes by 2029-30”. At present, an area of only 3.70 lakh hectares was said to be under oil palm cultivation.

What Has Been The Impact Of Surging Prices On Demand?

As rising prices pinched pockets amid pressures exerted by the Covid-19 pandemic on household budgets, the country actually saw a decline in palm oil imports in July, which dropped 43 per cent from the year-ago period to their lowest in five months.

Not just palm oil, soyoil imports fell by 22 per cent and sunflower oil imports dropped 66 per cent from the same month last year, news agency Reuters said, citing industry body Solvent Extractors’ Association of India (SEA). Soyoil and sunflower oil are sourced mainly from Argentina, Brazil, Ukraine and Russia.

But the drop in imports is seen as being a mere blip given that the government has lifted Covid curbs and cut import tax on edible oils. “Imports of all edible oils will jump in August. Demand has been improving for edible oil after the government lifted lockdown restrictions,” Reuters quoted an industry insider as saying. At the end of June, India had allowed imports of refined palm oil — which it had banned in early 2020 with the hope that it would boost consumption of domestically produced oils — and cut the import tax on crude palm oil to lower domestic prices.

Why Does India Want To Boost Palm Oil Production?

Informing Parliament in July about the decision to lift the curbs on import of refined palm oil, the Consumer Affairs Ministry said that “the domestic production of edible oils in the country is unable to meet the domestic demand… and the country has to rely on imports to meet the shortfall”.

Efforts have been initiated to boost edible oil production, especially when the country is one of the world’s leading exporters of agricultural produce.

“The kind of work we did in pulses, and even in the past in wheat and paddy, we need to make same efforts to boost the domestic production of edible oils, Modi said, adding that “the country has set new records of agri-exports during the corona period. Today, when India is becoming recognised as a big agri-exporting country, it is not right to stay dependent on imports for our needs of edible oil”.

Palm oil is extracted from the flesh of the palm fruit, the tree growing well in the tropical climate of Africa, South America and Southeast Asia. The Union Cabinet said that “oil palm produces 10 to 46 times more oil per hectare compared to other oilseed crops and has yield of around 4 tonnes oil per hectare”.

Self-sufficiency in edible oil production would benefit both farmers and consumers as they wouldn’t have to pay the higher price for imported oils. Further, Modi said that raising palm oil production would help the edible oil processing ecosystem and create jobs.

How Does India Plan To Boost Palm Oil Production?

The Centre had launched the National Mission on Oilseeds and Oil Palm (NMOOP) in 2014-15, but the scheme has been operating under the National Food Security Mission (NFSM) as NFSM(OS&OP) from 2018-19. It was run as a centrally
sponsored Scheme with sharing pattern of 60:40 for the larger states and 90:10 for Northeastern and hill states and 100 per cent for the Union Territories. Now, The NMEO-OP will “subsume the current NFSM-OP programme”.

The government had told Parliament in July this year that to promote oil palm cultivation, “assistance is provided for planting material, maintenance and inter-cropping costs for four years”, among other things. The government also extends support to oil palm processing units in the Northeastern and hilly states, Parliament was told. The NFSM-Oil Palm mission is being implemented in 12 states — Andhra Pradesh, Assam, Arunachal Pradesh, Chhattisgarh, Gujarat, Karnataka, Manipur, Mizoram, Nagaland, Odisha, Tamil Nadu and Telangana.

But the expansion in area under oil palm cultivation has not kept up with the target in recent years, the government told Parliament. In 2018-19, as against a target of more than 26,000 hectares, oil palm cultivation could be extended only to 11,800 hectares. For 2019-20, the target was 17,780 hectares but achievement was of under 13,300 hectares while, in 2020-21, against a target of about 22,800 hectares, the coverage achieved was of a little over 14,000 hectares.

What Are The Incentives The Scheme Provides?

The Centre said farmers who go in for oil palm cultivation will now receive price assurance that would shield them
against “fluctuations of the international CPO prices and… volatility”. The government said that it will also fix a formula price, on a monthly basis, which will be 14.3 per cent of CPO.

Apart from setting out a host of special provisions for the Northeastern states and the Andaman & Nicobar Islands, the Centre also said that it will “substantially increase the assistance of inputs/interventions”, for oil palm production.

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first published:August 18, 2021, 15:57 IST
last updated:August 18, 2021, 17:56 IST