Relevance: GS-3: Food processing and related industries in India, location, upstream and downstream requirements, supply chain management.
Key Phrases: Stagnation in production, edible oils, open general license, farmer producer organisations, Commercial Intelligence.
Context:
- Policymakers in the country have been expressing deep concerns over the widening supply-demand gap in vegetable oils, an essential food commodity of mass consumption.
Background:
- Till 1960s, India was a net exporter of oilseeds, meals, extractions and edible oils.
- However, by late-1970s, India became net importer of edible oils, owing to stagnation in production, and increasing demand for edible oils.
- By mid-1980s, edible oil was the largest imported item, constituting about 30% of the total imports, next only to petroleum products.
- As a result of the policy and technological interventions, production of oilseeds increased significantly during mid 1980s to early 1990s.
- In pursuance of the policy of liberalisation and globalisation in the early 1990s, imports of edible oils were liberalised, moving edible oils, from negative list of imports and canalization, to Open General License (OGL).
- With reduction in import duty, imports of edible oils, particularly palm oil and soybean oil, increased substantially.
Do you know?
- Vegetable oils are extracted from plant sources. They play a vital role in providing nutrition and are known to have numerous health benefits.
- Primarily, they are a major source of energy and carrier of essential nutrients which are vital for growth & metabolism, protecting brain cells, reducing the risk of heart disease etc.
- Indonesia is largest producer of palm oil the world. With 45.5 million tonnes of palm oil production in 2021-22, Indonesia produced over 60% of the total global output.
- India is the largest importer of palm oil in the world.
Current Situation:
- The situation has worsened following the outbreak of the Russia-Ukraine conflict, which has disrupted supplies, especially of sunflower oil.
- The prices of palm oil, soybean oil, rapeseed oil and sunflower oil have reached record levels (in some case doubling from year-ago levels) much to the dismay of import-dependent countries such as India.
- Given its high weight in the price index, edible oil is seen adding to food inflation in our country.
- India’s annual consumption demand of edible oils is about 22 million tons.
- Country annually imports, nearly 15 million tons (or nearly 68 per cent) of edible oils to meet the domestic consumption need.
- The bulk of these imports are palm oil, accounting for 60% or about 9 million tons of total import of edible oils.
Steps That Needs to Be Taken
- Backward linkage:
- A policy that requires large domestic processing entities to establish backward linkages to produce oilseeds is perfectly justified and is the need of the hour.
- Large processors must establish backward linkages, work with FPOs (Farmer Producer Organisations) and help lift domestic oilseed production.
- ‘Genuine Make in India’ which is when we produce and process more oilseeds domestically.
- Commercial Intelligence:
- In case of policy intervention, this market needs more informed decisions.
- A key reason for ill-timed and inadequate policy response is lack of commercial intelligence about market dynamics and market outlook.
- Decisions must be data driven, but the government does not have the requisite data, especially about vegetable oil import.This demands regulation and monitoring of import.
- Cooking Oil Through PDS:
- This country has a recorded history of supplying edible oil through PDS until the year 2002.
- It may be revived. PDS and private trade supplies can co-exist; they are not in conflict and both help advance consumer interest.
- Government-to-Government dialogue:
- Government-to-Government dialogue with Indonesia can pressure the exporting country to review its export duty insofar as export of palm oil to India is concerned.
- G-to-G import of palm oil from Indonesia through our State agencies for supply through welfare programmes and open market sale may be considered.
- It will exert a salutary effect on market prices.
Do you know?
National Mission on Edible oil – Oil Palm (NEMO-OP)
- NMEO-OP is a Centrally Sponsored Scheme that was announced by the Prime Minister during his Independence Day speech in 2021. It is proposed to have an additional 6.5 lakh hectares for palm oil by 2025-26.
- It will involve raising the area under oil palm cultivation to 10 lakh hectares by 2025-26 and 16.7 lakh hectares by 2029-30.
- Oil palm farmers will be provided financial assistance and will get remuneration under a price and viability formula.
- Another focus area of the scheme is to substantially increase the support of inputs/interventions.
- Special assistance will be given to replant old gardens for their rejuvenation.
- The special emphasis of the scheme will be in India’s North-Eastern (NE) states and the Andaman and Nicobar Islands due to the conducive weather conditions in the regions.
What Government is doing?
- Import duties have been revised multiple times. Import policy for refined palm oil has been tweaked from ‘restricted’ to ‘free’.
- Additional price control mechanisms like freezing the tariff value, imposing stockpile limits and suspending futures trading in edible oils and oilseeds has been adopted.
- Governmenthave launched the National Mission on Edible oil – Oil Palm (NEMO-OP).
- Here, a whooping sum of USD 1.49 billion (Rs. 11,040 Crore) was allotted in a bid to reduce the import dependency and achieve self-sufficiency in edible oils.
- The Centre is planning to raise the domestic production of palm oil by three times to 11 lakh million tons by 2025-26, by raising the area under oil palm cultivation to 10 lakh hectares by 2025-26, and 16.7 lakh hectares by 2029-30.
Conclusion:
- Palm oil import is inevitable because of its usually attractive price and proximity of supply source.
- Even as we work towards boosting domestic production, it is necessary to engage closely with countries such as Indonesia and Malaysia with which we have a long trading relationship.
- While oil palm cultivation has caught the fancy of the policymakers, a lot needs to be done to strengthen the entire vegoil complex so that the interests of all stakeholders (growers, consumers, industry) are finely balanced.
Sources: The Hindu BL
Mains Question:
Q. How India can become atmanirbhar in vegoils. Discuss the factors which have disrupted the supply chain of these vegoils in recent times. (250 words).
