The global oils and fats consumption has grown at a compounding annual growth rate of 3.8% for the past 10 years, which led to oils and fats requirements of 237.56 million MT in 2019. Limited land and growing needs for other agricultural crops have resulted in inadequate production of oilseeds which lead to heavy reliance on importation for net importing countries. One of the countries, India, consumed 25.28 million MT of oils and fats last year, making it the second largest consuming country in the world after China.

Driven by economic growth and huge populations, India’s domestic consumption of edible oils has increased substantially during the last few years. Palm oil is by far the most consumed oil in the country with projected demand for it to double by 2030. With an aim for edible oils security for the country and ultimately to reduce import dependency, the Indian government has called for domestic expansion of oilseed crop including oil palm. Recognising its highest productivity amongst cultivated crops, India has been aggressively pushing for increased domestic cultivation of oil palm under special government programmes.

The National Mission on Oilseeds and Oil Palm (NMOOP) was set up in 2014 with a mission targeting an increase in the productions of vegetable oils that are sourced from oilseeds, oil palm and tree borne oilseeds (TBOs) such as jatropha, olive and walnut (Department of Agriculture, Cooperation & Farmers Welfare, India). Prior to NMOOP, the government initiated the Oil Palm Area Expansion (OPAE) between 2011 and 2014.

The NMOOP was launched under 3 Mini Missions to achieve specific targets. Under the MM–II, the mission’s target is to broaden the area for oil palm cultivation and boost the production of Fresh Fruit Bunches (FFBs) from 4927 kg/ha to 15,000 kg/ha. (Department of Agriculture, Cooperation & Farmers Welfare, India). The mission citing the importance of oil palm was launched in 12 potential states in India with a number of objectives, among others to bring 75,000 hectares area under palm cultivation and increase the production of edible oils; to provide profitable rates for FFBs when international Crude Palm Oil (CPO) price drops; as well as to support farmers through Market Intervention Scheme (MIS).

However, there are a number of major constraints facing the implementation of the oil palm cultivation in India. It is widely known that oil palm has a long gestation period resulting in the restrictions of income flow to farmers for at least 4-5 years. Independent smallholders are faced with limited resources since they are not linked to any particular company or mill. Due to this, they are lacking in the training, supervision or support that are normally rendered by companies, and only receive limited assistance from the government. With limited knowledge on good agricultural practices, this has resulted in lower productivity and lack of interest in sustainability. 

Weather is another factor that could make or break crop success in India. The country is often faced with erratic monsoon that leads to shortage of water. The impact of erratic monsoon on its agricultural sector is direct as 50-60% of its crop production depend on natural rainfall without access to any form of irrigation. Oil palm is also facing competition with other economically viable crops such as rubber, sugarcane, banana and coconut, just to name a few. Fluctuation in prices of CPO in the international market as well as FFBs’ price are another hindrance in the cultivation of oil palm programme in India. Variation in import duty on edible oils also further discourages local farmers.

Land expansion for an agriculture especially if it’s a new crop will always be subjected to issues such as sustainability as well as biodiversity and oil palm cultivation in India is no exception. Criticism has been thrown at the land expansion for oil palm in particular the north-eastern states of Mizoram, Assam, Arunachal Pradesh, Nagaland and Tripuraare. Claims such as the expansion will cause potential threats to the biodiversity and livelihoods of indigenous communities in this region start to surface.

Moreover, a great amount of land in this region are community owned and managed. Due to the oil palm expansion, states such as Mizoram have instituted New Land Use Policies focusing on replacing traditional shifting cultivation with settled agriculture. This has resulted in dissatisfaction among the communities opposing the proposed new policy, stating that it is harmful for their ecologically sustainable traditional land-use management systems.

Lack of in-depth research and studies has also resulted in many questioning the viability of the programmes. Similarly, government policies relating to the oil palm expansion have been condemned for its shortcoming in terms of insufficient dialogue with relevant stakeholders, low transparencies with the policies as well as biased experimental studies.

With many challenges at hand, the government has identified policy measures in a bid to foster the growth in the oil palm expansion:-

• Declaration of oil palm as a plantation crop;
• Provide low cost credit to the farmers;
• Strengthening distribution of critical inputs specially quality planting material;
• Research & Technology Development and Dissemination;
• Enhance subsidy on critical inputs such as planting material, maintenance cost of new plantation during gestation period, inter-cropping, bore-well and processing mill;
• Location of specific technologies for better production needs to be developed urgently;
• Infrastructure development such as FFBs’ collection centre, road from plantation field to FFBs’ collection centre and processing industries and electricity;
• Set up of farm implement custom hiring centre;
• Time procurement and support price for FFBs of oil palm;
• Post-harvest management, value addition and cost effectiveness;
• Minimization of corruption among the service providers.

More recently, the call by the Prime Minister, Nadendra Modi echoed the unwavering determination towards India’s aspiration to become self-reliance. An oilseed mission to cut down imports is in the pipeline, reportedly equivalent to India saving up to approximately USD9.5 billion on their edible oils imports. While the desire for self-sustaining deserves an applause as the nation aspires to move away from being dependent on others, questions remain on whether is it really possible for the country with huge supply-demand gap to achieve all these targets in such short span of time.

Taking everything into account, India’s domestic expansion of oil palm plantation still has a long way to go and the route to reducing its dependencies seems unrealistic for now. A recent study by Research and Markets reported that the edible oil market in India is projected to grow from around $21.5 billion in 2019 to $35.2 billion by 2025 due to increasing disposable income and rising consumer awareness about healthy lifestyle and wellness. In addition, expanding population and surging penetration of processed foods will continue to drive up the consumption rate of edible oils in the country.

India is a price sensitive market. Hence, the preference towards palm oil over other edible oils for the food producers. On the other hand, palm kernel oil is the preferred choice by the manufacturing industries due to its price differential in relation to the competing oils. In this instance, Malaysia is able to offer competitive prices for the palm oil due to the productivity gains attained by local suppliers. As the gap between domestic consumption and production of edible oils widens, it is inevitable that India will continue to remain on importation of oils and fats especially palm oil to fulfil the country’s edible oils requirement

References:

1. Oilseed Division, Department of Agriculture, Cooperation & Farmers Welfare, India
2. National Mission on Oilseeds and Oil Palm (NMOOP), Ministry of Agriculture and Farmers Welfare, Government of India
3. SAGE Journals
4. Research and Markets

Prepared by Azriyah Azian

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.