Improving crop yields: New policy to boost edible oil output, cut imports

To give a boost to oilseed production and thereby India’s import dependence on edible oils, the government is considering a slew of steps including providing incentives to farmers and processors. The idea is to increase the production of mustard, sunflower and other oilseeds by expanding areas under cultivation and improving crop yields.

Sources told FE that the agriculture ministry will soon prepare a Cabinet note detailing incentives for oilseeds farmers as well as steps to link them with private processing units.

After crude petroleum and coal, edible oils are threatening to strain India’s current account, with imports of these items seen surging 65% on year to $17 billion in the 2020-21 ‘oil year’ (November-October) due to a spike in global prices. The imports have continued to be high since. Of course, the government, which used to strike rich through high import taxes on edible oils by appropriating more than a third of the import value, cut taxes in November last year and in February.

Mustard production will be promoted by bringing more areas under cultivation in non-traditional regions such Karnataka, Maharashtra and areas under rice fallows (which remain uncropped in rabi season) in Uttar Pradesh, Bihar, Jharkhand, West Bengal, Assam and Odisha.

Mustard, which contributes about 39% of India’s domestic edible oil production, is currently grown mostly under rainfed cultivation thus impacting the yielding.
Officials said that in the current rabi season (2021-22), the mustard sowing has increased by 24% to 9.1 million hectares (mh) compared to close to 7.3 mh reported a year ago. The target would be to expand the area of cultivation to more than 12.2 mh in the next couple of years.

The government is also discussing measures to revive sunflower production, which is currently grown in small areas. According to an agriculture ministry official, the average area under sunflower ranged from 2.1 mh in 1990-95 to 1.94 mh in 2005-2010. The area declined to 0.28 mh during 2017-18 and currently stagnated around 0.26 mh.

Officials also said that the lack of remunerative price is the main reason for the decline in the area of sunflowers during recent years. “Less involvement of private companies in the seed production due to less sunflower area has further reduced the cultivation,” an agriculture ministry note has stated.

In August 2021, Prime Minister Narendra Modi had launched the National Mission on Edible Oils – Oil Palm for bringing in an additional 6.5 lh under palm plantation 2025-26 with an investment of Rs 11,040 crore.

At present, 0.36 mh is under palm plantation. However, it would take about 5 to 7 years before palm seeds can be extracted for processing.

Currently, India produces about 45% of domestic edible oil consumption. Other oils are soybean (24%) and groundnut (7%) share in domestic production.
Crude palm and soybean oil are imported mainly from Malaysia, Indonesia, Argentina and Brazil, and these items had shares of 62% and 21% in the total edible oil imports, respectively. Because of high import dependence, in the current fiscal the edible oil imports is likely to be Rs 1.5 trillion in 2021-22. India depends on Ukraine for sunflower oil, which had a 14% share in the total edible oil import basket in 2020-21.

To curb the spike in edible oil prices, the government had initiated several measures including the imposition of stock limit along with monitoring of stocks declared by entities to prevent hoarding as also requisite changes in trade policy instruments like rationalisation of import duty, changes in import quota, restrictions on exports of the commodity, etc.

The government recently has also cut the basic import duty on Crude Palm oil, Crude soyabean oil, and Crude sunflower oil from 2.5% to nil. The Agri-cess on these oils has been brought to 5%.