Why Palm Won’t Fix India’s Edible Oil Crisis

Edible oil prices hit record high this year, Rao earns his fair share, closes ₹10 lakh in net profit, something he could never get through paddy – the crop he used to grow earlier.

But that is only half the story. About three years ago, several farmers in Rao’s district had uprooted their orchards when the price of fresh palm-oiled fruit bunches was rolling around. ₹8,000 per tonne – less than half of the current market price.

Palm oil is a low maintenance and high yielding crop. But it is also a water consumption and needs more than 300 liters of water per tree per day. This is the reason why it is mostly grown in Malaysia and Indonesia, where it rains throughout the year. However, in Andhra Pradesh, the state with the largest number of palm oil plantations in India, the crop is largely irrigated from groundwater extracted from borewells.

The jury is still out on whether refined palm oil is healthy (compared to other oils) but one aspect is completely clear: its abundance on Indian consumers’ plates. Cheap palm oil, almost all of its imports, accounts for more than a third of India’s edible oil consumption; Overall, India imports 60% of its requirements. This lack of “self-reliance” is a major reason for the rising prices of cooking oil, as domestic mustard and groundnut oils have limited scope and, as a result, the market has kept pace with the international prices of major palm oil.

On an average, retail prices increased by 33 per cent in July compared to last year, the highest among all food items. And this matters because edible oil is comparable to other essential food items such as onions and pulses – widely used by the majority of Indians and, by extension, a political lightning rod.

According to Suresh Nagpal, president of the Central Organization for Oil Industry and Trade, the current international price of crude palm and soya oil is almost double the prevailing level in 2019. The underlying reasons are several: low production due to pandemic-induced labor shortages in Indonesia and Malaysia, significantly higher demand from China, and diversion of soy oil to bio-diesel production in the US.

In response to the crisis, the central government launched a ₹11,000 crore National Mission on Palm Oil in August. The policy is a mix of price assurance and planting support to farmers, with a focus on the north-eastern states and Andaman and Nicobar Islands, both of which receive abundant rainfall. But the mission seems to have missed the forest for the trees. India is targeting to add about 2.5 million tonnes (mt) of domestic crude palm oil by 2030. Not only is this a decade-long gestation period, but once consumption growth is accounted for, India will also be heavily dependent on imported oils. If the target is met.

The policy also completely ignores oils that are already native to India, such as mustard, groundnut, sesame and coconut, which are healthier and mostly grown by resource-poor farmers in rain-fed conditions. . In fact, in the early 1990s, India achieved self-sufficiency in edible oils by focusing only on indigenous oils. The cheap imports were followed by floods in the market, discouraging farmers from planting indigenous oilseeds.

From 1986—when India launched its first technology mission in oilseeds—until about 1994—when it joined world trade organization (WTO) – This had significantly increased the cropped area under oilseeds. The production of indigenous oils doubled. Oddly, the country is now betting on a crop with a longer shelf life of 4-5 years, not even enough for what the crop needs the most: water.

divided house

India’s current thrust to promote palm oil is driven by its key advantage: productivity. Sanjay Goenka, president of Oil Palm Developers and Processors Association, an industry lobby of Godrej Agrovet Ltd and Ruchi Soya Industries Ltd, said that the clusters of fresh palm fruits contain at least five times more oil per unit of land than other oilseeds. . Member

Goenka said the “misinformation” about palm oil being unhealthy is intentional, as its global dominance has eroded Western hegemony in soybeans and sunflowers. For the new policy to be successful, states have to do their bit by respecting “zoning norms”, Goenka said. For example, to complete 50,000 hectares of plantation, a company has to invest approx. ₹2,000 crore (this includes the cost of plants and assistance for farmers). Since a firm can start replenishing its investment and make profits only by the tenth year, farmers will inevitably have to supply to the company which is operating in a particular sector and vice versa.

However, oil refiners are skeptical about any significant changes. “Palm is a long-duration crop and would have been appropriate policy support had been given in the fitness of things for other highly oil-bearing oilseeds,” wrote Atul Chaturvedi, president of the Solvent Extractors Association, in the August issue. Industry newspaper.

Chaturvedi said India’s consumption and import dependence will continue to grow in the intervening decade and the palm project is likely to fall into the sea. “We expect (that) the announcement of the long-delayed and debated National Mission on other oilseeds like mustard, groundnut, soya, rice bran etc. (a) on an urgent basis if we (are) to achieve a There is no hope of equality of Atmanirbharta (self-reliance) in edible oils.”

States like Andhra Pradesh and Telangana, which once promoted paddy and cotton without a thought, are now looking to switch to palm oil, says GV Ramanjaneyulu, executive director of the Hyderabad-based Center for Sustainable Agriculture. “Oil palm can be grown sustainably if the focus is on optimum and not on maximum productivity. What purpose will it serve if we (only) use groundwater available (only) in a decade or two? ’ asked Ramanjaneyulu. He said the industry lobby’s next potential demand would be relaxation of land boundary rules, which would then allow for large plantations that could potentially dry out entire areas.

In addition, the crop is suitable for wealthy, large land-owning farmers and absentee landlords who may wait up to 5 years before making profits. Therefore, the strategy for achieving self-sufficiency on palm basis does not involve existing small and marginal oilseed growers. In addition, it reduces farmers’ responsiveness to the changing market demand. For example, farmers may plant more mustard and groundnut this year due to rising prices, but not because of the longer ripening of the palm.

Compared to 15 million tonnes of edible oils imported into India, domestic production ranges between 10-11 million tonnes every year. Mustard, groundnut and soybean account for more than half of domestic production.

According to some experts, India can achieve price stability with several strategies, including better research and development (R&D) to increase yield and oil content in mustard and groundnut. In addition, farmers would need duty protection from cheap imports, along with farming incentives and price support – or better still, a mixture of both. Another possible solution is to motivate and encourage farmers to move away from rice, wheat and sugarcane – the crops that currently receive the most price support, leading to a perennial abundance – and instead Sow more oilseeds and pulses where India is lacking.

“If palm oil is not eco-friendly and we want to stop buying it from Malaysia for that reason, then there is no point for us to promote it in the northeast,” said former agriculture secretary T. Nanda Kumar. The challenge is this: can we get higher oil content from mustard and peanuts? By following improved varieties? Another oil source is rice bran, which is healthy and has great potential.”

Kumar said raising duty on palm oil imports would be politically difficult as it would lead to inflation. One way is to impose quantitative restrictions and channelize imports, especially for poor households, through the public distribution system to stabilize consumer prices.

For now, the current price of oilseeds like mustard will motivate farmers to bring more area under cultivation. Harman Brar, a farmer from Sri Ganganagar, said, “Wholesale prices of mustard have more than doubled as compared to last year and farmers in my area grow some areas of gram, wheat and barley during the winter harvest season (from October). Will replace it with mustard.” Rajasthan Rajasthan.

History’s ‘Rooks’

How did India achieve atmanirbharta The early 1990s may still serve as a foreboding lesson from history. Not many know that the late Verghese Kurien of Amul Doodh fame was instrumental in launching the Dhara brand when he was the chairman of the National Dairy Development Board (NDDB). Kurien ensured that a remunerative price is paid to the mustard growers while ensuring price stability for the consumers. Dhara was a smash success and became the leading edible oil brand within a few years.

Kurien wrote in his autobiography, “Oil lobbies from other countries were unhappy (as imports had declined by 90% by 1993) … a dream’. Several NDDB officials were physically assaulted and killed in Bhavnagar, Gujarat. Its co-operative oil mill was repeatedly set on fire.” “The crooks, who exploited both farmers and consumers for decades, eagerly waited for our edible oil project to fail, Kurien wrote.

The brief window of self-reliance continued until India signed the World Trade Organization agreement in 1994 and allowed edible oil imports by the Narasimha Rao-led government. By 1998, imports had risen to 30% of consumption. According to BM Vyas, former managing director of Amul, who was also instrumental in launching Dhara, “under the (Atal Bihari) Vajpayee government, the import duty on edible oil was further reduced to 15% in July 1998, and Incidentally, in August 1998 there was a case of Argemone adulterated dropsy.” In Delhi, more than sixty people died and thousands were sick. Local Ghanis were in a rage and the sale of loose oil was banned.

Some believe that this was a deliberate ploy to sabotage India’s local success story in the oil sector. This episode marked a permanent shift in consumer preference towards refined oils extracted from colorless and odorless solvents, which have been ripped off by the nutritional properties of oilseeds. Over the next few years, that Black Swan event in the late ’90s changed cooking and consumption patterns, Vyas wrote in a 2020 essay for The Wire.

Cut down currently, home-grown cold-pressed or expeller-pressed oils, which are extracted at low temperatures to retain nutritional properties, are retailing more ₹250 per liter—not affordable for most consumers, who are tempted to buy cheaper refined and blended oils.

According to Veena Shatrughan, former deputy director of the National Institute of Nutrition, excessive consumption of palm oil is as good or bad as over-consumption of any other oil, but ideally, a mixture of different edible oils should be consumed. “Cold-pressed oils are healthier than solvent-extracted ones, provided they are not adulterated,” Shatrughan said, adding that “consumption should be limited to 30-50 grams of oil per day per adult… that’s nutritional, The rest is politics.”

Palm oil is now widely used for blending and mixing refined oils and is ubiquitous in packaged and processed foods, from biscuits and chocolate to potato chips and instant noodles. To add to this mix, India is consuming copious amounts of genetically modified soya oil which is imported from countries like Argentina and Brazil.

Overall, imported palm and soya oil (12 million tonnes) accounts for almost half of India’s annual edible oil consumption, hurting the future prospects of domestic oilseeds.

Kurien recalled in his book the words of his opponents who warned, “Unlike milk, oil was a very slippery business and was bound to slip and fall on Kurien’s face.” As it turns out, it was not Kurien, but the high paying Indian consumers.