PremiumIndia’s edible oil import bill touched a staggering ₹1.17 trillion between November 2020 and October 2021. However, India is doing little to promote native oils. Mint explains how the government can address the problem in a sustainable way.
India’s edible oil import bill touched a staggering ₹1.17 trillion between November 2020 and October 2021. However, India is doing little to promote native oils. Mint explains how the government can address the problem in a sustainable way.
Why did the import bill shoot up?
India’s edible oil import bill shot up 63% to ₹1.17 trillion during oil year 2020-21 from ₹71,625 crore the year before. The volume of imports remained the same—at about 13 million tonnes—but the value rose sharply due to a spike in the international prices of palm and soy oil. The global price surge was driven by the pandemic-induced labour shortages, higher demand from China, and the diversion of oilseeds for biofuel production. And despite repeated duty cuts, domestic retail prices rose 35% in October, burning a hole in the consumer’s pocket. Thus India paid a heavy price for its acute dependence on imports.
What about domestic production?
Less than half of India’s edible oil consumption is met by domestic production of oilseeds such as mustard, groundnut, and soybean. In the mid-1990s, India had achieved self-sufficiency after production nearly doubled between 1986 and 1995. But after it allowed cheap imports of palm oil from Malaysia and Indonesia at negligible duties, domestic growers lost interest. Now, poor farmers in rain-fed regions are the ones growing oilseeds, hence the low productivity. Post-1995, the tepid increase in production was unable to keep up with growing demand.
What steps did the government take?
To shield consumers from the price rise, the government often reduces import duties. This year, it slashed the duty on crude palm oil from 36% to 8%. The duty on crude soybean oil was reduced from 39% to 5.5%. In August, the government launched a national mission on oil palm with a budget of ₹11,000 crore, to boost the production of oils.
Would these steps help?
Very unlikely. Oil palm takes 5-7 years to achieve reasonable yields. The national mission is targeting to add about 2.5 million tonnes of palm oil to the domestic basket by 2030. In the near future, even with a modest increase in consumption due to rising population, India will continue to depend heavily on imported oils. Besides, oil palm is a water guzzler suited to Malaysia where it rains through the year. Growing it in Andhra Pradesh, which is the largest producer, using groundwater may not be ecologically sustainable.
What else could the government do?
India achieved self-sufficiency in the mid-1990s by focusing on native oilseeds like mustard and groundnut and promoting oil co-operatives. It can repeat that success. The Centre can incentivize farmers to grow more oilseeds as well as pulses where India is deficient. It can be done by ensuring a support price to farmers who own irrigated lands, but are currently growing crops like rice, wheat, and sugarcane where production is in surplus. Such a strategy would also ensure sustainable use of water and land.
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