Stimulus needed for the growth of India’s edible oilseed economy.
NEW DELHI: The Union Budget 2020-21 has several sops for the development of the agriculture sector, including a substantial allocation of funds to the tune of RS 2.83 lakh crore. The Finance Minister has also unveiled a 16-point agenda to achieve this, reiterating the Union Government’s commitment to double farmers’ incomes by 2022. The list includes everything from liberalization of farm markets and increased use of technology to development of an integrated farming system in rain-fed areas and more.
Laudable steps undoubtedly, but what is missing is one vital component, which if addressed will contribute in large measure to the prosperity of our farmlands. One was expecting a comprehensive and time bound strategy to provide stimulus to the growth of India’s edible oilseed economy, considering that several agro-economists have, time and again, emphasised the need to achieve self-sufficiency in oilseed production. Frankly, making India self-reliant in edible oil production is a mission in itself and needs to be accomplished, the sooner the better. India certainly possesses the wherewithal for self-sustenance in this area. With 21% of world’s area under oilseed production and 5% of world’s production, India is the fourth largest oilseed producing country in the world, next only to the US, China and Brazil. Oilseeds is the nation’s second largest agricultural commodity after cereals and shares 13% of the country’s gross cropped area, nearly 5% of Gross National Product and 10% of the value of all agricultural products.
GENESIS
And yet we are an oil deficient economy. There is a yawning gap between demand and supply of edible oil. The genesis of this issue lies in the fact that oil consumption in India has increased in leaps and bounds—from less than 6 kg per capita in 1992-93 to 18 kg in recent years. This may be attributed to the rising income levels and improvement of living standard of people. No other agri-food commodity has seen an increase of this magnitude. Statistics gleaned from Directorate of Sugar & Vegetable Oil (DS&VO) corroborate this observation. According to DS&VO the total consumption of edible oils in India has shown a growth at a CAGR of 4.6% from 159.54 MMT in 2008-09 to 249.8 MMT in 2018-19. And herein lies the problem. As against the aforesaid stats, during the same period, domestic oil seed production increased only marginally at a CAGR of 1.6%—from 27 MMT to 32 MMT. As per the “Commodity Profile of Edible Oil for September—2019”, the quantum of edible oil available for consumption during 2018-19 was 24.98 MMT, of which only 10.06 MMT was met through domestic supplies. The huge gap of 14.92 MMT was met through imports.
Several factors contribute to the failure of the domestic oilseed industry to keep pace with the rising demand. Limited size of land, dearth of technological improvements in the field, vagaries of weather are some of them. Since oilseed farming is not a money spinning activity like plantation of maize, cotton and chickpeas, almost 73% of the cultivation happens in the rain-fed eco system, resulting in low productivity and erratic output and distressed fields. Despite this the area under oilseed cultivation has not declined, as these farmers have no other viable alternative. We do not have a coherent strategy to galvanize this currently dormant sector so vital for the economic health of our farmlands.
The availability of cheap palm oil from Malaysia and Indonesia is also an important contributory factor. Look at the figures. Presently, India imports close to 66% of its total edible oil requirements from various countries. As per the Department of Commerce, the total value of oil import was RS 66,680 crore in 2018-19, which is 2% of India’s total import bill of RS 3,001,033 crore. This makes the country the largest importer of oil in the world.
On its part, the Government is trying to address the issue of burgeoning imports, which is also partly a legacy problem. In 2018, for the first time, the union government raised the tariffs on all types of vegetable oils, in order to protect domestic oilseed prices and revive the country’s dwindling oilseed economy. In late 2019, it raised the customs duty on the import of edible oil up to 50% to enable Indian farmers to get a competitive remuneration for their produce. On Saturday last, the Union Government, in a bid to boost indigenous oilseed production, issued a notification raising import tax on crude palm oil from 37.5% to 44%. However, there seems to be some confusion over the new notification as on 31 December, last year, India had slashed import tax on crude palm oil coming from ASEAN nations from 40% to 37.5%. Hopefully, the issue will get sorted out soon.
INDIGENOUS PRODUCTION: A TALL ORDER
The major issue of how to enhance our domestic oilseed production still remains unaddressed. To be self-sufficient by the turn of the current decade, India would need to produce at least 45 million tons of oilseed as against current 31 million tons. In 2008-09, our oil seed production was 27 MMT and in 2018-19, as per the figures gleaned from the Union Ministry of Agriculture, it is 32 MMT. This means there is only a marginal rise in the production of oilseeds. According to the latest agricultural statistics oilseeds were cultivated on 24.65 lakh hectares of land during 2017-2018.
India has nine types of oilseed crops, of which seven—soybean, groundnut, rapeseed-mustard, sunflower, sesame, and safflower—are cultivated for edible oils and castor and linseed are for non-edible purpose. Besides these, we also grow a number of minor oilseeds of horticultural and forest origin like coconut and oil-palm. We extract oils from rice bran, cottonseed, and in small quantities, from tobacco seed and corn.
TRACKING THE ROOTS
India imported less than 100,000 tonnes of edible oil per year till the early 1970s. Around 1975-76, however, imports increased as domestic oilseed production stagnated. By the next decade, India’s oil imports had touched the 2-milllion tonnes mark, and after petroleum products, edible oils accounted for the largest drain on India’s foreign exchange resources. Alarmed by this unprecedented development, the government of the day launched the Technology Mission on Oilseeds (TMO) in 1986. Its basic objective was to substantially reduce the import of edible oils by the end of the Seventh Plan, i.e., by March 1990 and to ultimately achieve self-reliance during the course of the Eighth Plan.
Subsequently, pulses, oil palm and maize were also brought within the purview of the Mission. Parallely, the National Oilseeds and Vegetable Oils Development Board (NOVOD) also swung into operation exploring newer oilseeds like Tree Born Oilseeds (TBO), to supplement TMO’s efforts. TMO supported and promoted new production and processing technologies, and created a fair price environment for oilseeds producers. Imports were strictly regulated. In about six years post TMO formation, the production of oilseeds in the country increased by 78% from 11.3 MMT, and imports fell from 2 million tonnes in 1986-87 to 0.1 MMT in 1992-93. The country achieved self-sufficiency!
The various components of TMO continue to be in operation under the current National Food Security Mission (Oilseeds & Oil palm) and are working towards increasing production and productivity of vegetable oils sourced from oilseeds and oil palm, in order to reduce the import of edible, among other things.
When liberalisation dawned, self-reliance was relegated to obscurity. In the realm of the overarching theme of pro-liberalisation, cereals production took precedence over all other farm produce including oilseeds and the edible oil sector was thus opened up for imports. Duty rates on import of palm oil from Malaysia and Indonesia were slashed dramatically. Domestic oilseed producers had to now compete with cheap palm oil, which was neither part of India’s production nor consumption. This was the beginning of the decline of our oil seed economy.
WHAT NEEDS TO BE DONE
A speedy recourse is necessary if we truly want to boost the indigenous edible oil sector. The government of India should formulate a favourable policy, which provides a fresh impetus to our oilseed economy that benefits all stakeholders in the ecosystem, especially farmers. The creation of the commodity exchanges, primarily to help farmers to transact, was a welcome step. Sadly, today it is the market where speculators rule the roost and where cultivators do not have any say. May be a regulator is the need of the hour. Perhaps we should turn to biotechnology in a major way to produce better quality, high yielding varieties of seeds. Genetically Modified Oilseeds (GMO), arguably, are considered to be a panacea for farmland problems. However, considering that a certain section of society has resistance to GMO over safety, the issue will have to be well deliberated upon to bring about a consensus. Lastly, we need to adopt the best practices of the other major oilseed producing nations. The government may think of creating a research and development hub to innovate value added products in the oilseed arena.