ON APRIL 28, TWO MONTHS AFTER the Russia-Ukraine war began, Indonesia banned export of palm oil to contain soaring cooking oil prices. India, the world’s largest importer of palm oil, got into a firefighting mode to prevent shortage of edible oil. When domestic prices shot up, Central government had to issue an assurance to people that the country had sufficient stock of edible oils. It said it has a stock of 21 lakh metric tonnes (LMT) edible oils, while another 12 LMT is in transit.

The ban, and resulting supply disruptions, was another reminder of India’s vulnerability to fluctuations in international edible oil markets — India imports over 133 lakh tonnes edible oil worth ₹80,000 crore every year, more than half its demand. Edible oil and related products such as vegetable or animal fats is India’s 7th-largest import category. Shortage and resultant price increase can derail India’s fiscal calculations and fuel inflation.

Disruption from Indonesia (Malaysia is the other source of palm oil) was particularly worrisome as palm oil, crude & refined account for roughly 62% of edible oil imports. While soybean oil, which is 22% of India’s edible oil imports, comes from Argentina and Brazil, sunflower oil (15% of edible oil imports) comes from Ukraine and Russia.

Behind the brave face that India displayed were a series of measures taken recently to improve availability of edible oils: Cut in basic duty on crude palm oil, crude soyabean oil and crude sunflower oil from 2.5% to zero; cut in agri-cess on these oils from 7.5% to 5%; slashing of basic duty on refined soyabean oil and refined sunflower oil from 32.5% to 17.5% and basic duty on refined palm oil from 17.5% to 12.5%. Government also allowed duty-free import of refined palm oil till December 31, 2022, and extended concessional import duty on all edible oils up to September 30, 2022. It also imposed stock limits. Fortunately, by May-end, Indonesia restored exports.

Still, these supply disruptions brought to the forefront the need to slash import dependence in a commodity where, even after 75 years of Independence, only 45% demand is met by domestic production. In order to do exactly that, in August 2021, the government had launched an ambitious National Edible Oil Mission-Oil Palm (NMEO-OP) to reduce dependence on imported edible oil from 55% to 40%. The target is to increase area under oil palm cultivation from 3.7 lakh hectares to 10 lakh hectares and produce 11.2 lakh tonnes crude palm oil or CPO (from 2.72 lakh tonnes in FY21) by FY26 and 28 lakh tonnes by FY30. Since oil palm, with yield of around four tonnes per hectare, produces at least 10 times more oil than other oilseeds, it is considered the only crop that can help India become atmanirbhar or self-reliant in edible oil.

With an outlay of ₹11,040 crore and framework that has been well-received by stakeholders, Centre seems to be doing everything possible to make NMEO-OP work.

Bitter Truth

India’s attempts to increase domestic edible oil production are not new. “Irrigated oil palm cultivation was introduced in 1983, Technology Mission on Oil Seeds was initiated in 1986,” says Balram Singh Yadav, MD, Godrej Agrovet, which cultivates and processes oil palm. Central government had identified 5.75 lakh hectares in nine states for cultivation of oil palm in 1988. The first Oil Palm Development project was launched in 1990.

India had 8,585 hectares under oil palm in FY92. These initiatives led to a sharp increase to 3.7 lakh hectares in 30 years but this was not enough. Growth in edible oil consumption, currently above 25 million tonnes, kept outpacing domestic production, which was 12.29 million tonnes in FY21. Per capita consumption of edible oil, 15.8 kg per person per annum in FY13, is 19 kg today. “The performance (of palm oil missions) has not been encouraging so far. Only 16% potential area (out of 19.3 lakh hectares) has been brought under oil palm cultivation. Only 74% subsidy has been utilised since FY05 (after government started offering incentives for oil palm). The utilisation rate is only 50% since FY14, indicating poor execution (of government programmes),” says Yadav. He blames random changes in price by governments, shortage of quality seedlings due to low subsidy, delay in disbursement of fertiliser subsidy to farmers and processors and poor farmer hand-holding during the gestation period. The question whether the new NMEO-OP scheme will give different results than earlier ones arises out of this bitter experience.


“There have been multiple oil palm missions, but in bits and pieces. None covered the problem of fluctuating prices for farmers like NMEO-OP does,” says Sanjay Goenka, MD & CEO, 3F Oil Palm Agrotech Pvt. Ltd. 3F Oil Palm Agrotech, Godrej Agro and Ruchi Soya account for 75% of India’s oil palm plantations.

“Interests of all stakeholders have been taken care of,” says Ravi Kumar Mathur, director, Indian Institute of Oil Palm Research (IIOPR), which is driving the new mission. “Price used to be the major pain point. Government has taken care of this vital component. Today, the farmer and the processor know pricing mechanism, viability gap funding, etc., till the scheme ends in 2037. We have incorporated all past lessons. We have chosen areas most suitable for oil palm cultivation. We are supporting farmers from planting to harvesting stage,” says Mathur.

NMEO-OP offers ₹29,000 per hectare subsidy for saplings as against ₹12,000 under the earlier scheme. It is also paying ₹75,000 per hectare for implements as against ₹25,000 earlier. But the most attractive component is viability gap funding and price assurance. The scheme assures farmers viability price of 14.3% of inflation adjusted annual average price of CPO for last five years. Given that prices are at a record high of around ₹22,000 per tonnes FFB per hectare as against ₹11,000 three years back, the five-year average will protect farmers from steep fall in CPO prices. Further, if the price the processor needs to pay is below the viability price, government will pay the difference to farmers.

IIOPR has also identified crops that can be grown between rows of oil palms to increase income of farmers from first year itself since oil palm takes three years to bear fruit. “We promote oil palm + intercrop, including black pepper, long pepper, turmeric, ginger, aromatic plants, etc. Planting material is supplied by the department of horticulture,” says Mathur. All components for encouraging oil palm cultivation seem to be in place, but the country is yet to see a quantum jump in acreage that can help it achieve the 10 lakh hectares target by FY26.

Implementation Woes

“Central government has done whatever it can do, but implementation is in hands of states. Several states have not even notified areas they will allocate under NMEO-OP,” says Godrej Agrovet’s Yadav.

The tricky part is that NMEO-OP gives states an option to have their own pricing policies if they do not want to implement the Central policy word by word. Operational guidelines by agriculture ministry say that if states do not adopt the new scheme’s payment pattern, industry will pay the state-mandated price. In such a case, Centre will not give viability gap funding. The two states that account for a bulk of oil palm cultivation, Telangana and Andhra Pradesh, have implemented own pricing, depriving farmers and processors the ‘assurance’ of NMEO-OP. As a result, none of the established players seem to have signed up for fresh allotments they are planning to notify. In case of Telangana, which already has 21,382 hectares under oil palm coverage, 13 new players are known to have shown interest in managing additional areas its government wants to earmark for oil palm cultivation. However, the worry is whether they can discharge their responsibilities without any returns for a long time — companies are contractually bound to hand-hold farmers right through development stages of oil palm and procure all the produce at government-approved rates throughout the plant’s 30-year life cycle. “Oil palm farming has a long gestation period. Farmers get benefits in multiple ways, by way of subsidies, intercropping, etc., but a company sees any return only in 8th to 10th year,” says Goenka.

Yadav is confident of meeting government’s 6.5 lakh hectares additional target by FY26, provided the policy is implemented in true spirit. “It is easy provided state governments are proactive, release subsidies on time, finalise areas on time, observe transparency in allocation and sign MoUs with us on time. The private sector is ready. Private companies have seedlings for 25,000 to 30,000 hectares. And we can increase our nursery capacity 2X or 3X at six months’ notice,” he says.

While Andhra and Telangana are unwilling to embrace the Central scheme in its entirety, states in north-east are signing MoUs with Central government and planning to implement the scheme in full.

Atmanirbhar, a Long Way

IIOPR director Mathur has no illusions that the scheme will solve India’s import dependency overnight. “Our everyday requirement is increasing. The scheme will help us make sure that there is at least no further increase in imports. It will not cover the gap, but at least we can reduce imports over a period. We may have 40-50% import dependency even after this project is complete. Our target for self-sufficiency is 2040,” he says.

India also needs awareness campaigns so that people reduce edible oil consumption. “Government should work harder on educating the public that you are using 20% more oil per capita than what is recommended by anybody in the world. Oil consumption should not be more than 35-40 grams per day. We are right now consuming 46-47 grams per day,” says D.N. Pathak, executive director, Soybean Processors Association of India.

Centre also has other schemes for oilseeds. Since FY19, it has been supporting production and distribution of certified seeds and seed mini-kits of latest high yielding oilseed varieties under the National Food Security Mission: Oilseeds. For kharif 2021 season, 9.25 lakh oilseed mini-kits were distributed in major oilseed-growing states. As per 3rd Advance Estimates, FY22 estimated oilseed production is record 38.50 million tonnes, as against 35.95 million tonnes in FY21. The target is 54.10 million tonnes with productivity of 1,676 kg per hectare. Current productivity is 1,254 kg per hectare. Additional oilseed area of 3.5 million hectares (from 28.79 million hectares to 32.31 million hectares) is being brought under oilseeds.

But none of this has the potential of oil palm to make India self-reliant in edible oil. “There is a huge difference in yield of palm oil and other edible oil-bearing plant. Any edible oil-bearing plant, be it rice bran, sun flower, soyabean or ground nut, gives a maximum of 750 kg oil per hectare. Palm gives eight times more. So, government focus is on increasing productivity in other crops while increasing acreage of oil palm,” says Goenka.

Self-reliance may be a long-term goal, but Yadav says states can make a solid start. “They should allocate the area and ask companies what they intend to do in the next five-six years. Processors and state governments should work closely to make the scheme successful,” he says, adding: “This is the most profitable crop per hectare today”.

Centre hopes these profits are sufficient to attract farmers and companies.

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