Cabinet okays ₹11,040 cr to cut palm oil imports

The Union cabinet on Wednesday cleared a ₹11,040 crore project to try and increase domestic production of palm oil, aiming to cut India’s heavy dependence on edible oil imports.

The National Mission on Edible Oils-Oil Palm (NMEO-OP) will have a special focus on the North-eastern region and the Andaman and Nicobar Islands.

“Due to the heavy dependence on imports for edible oils, it is important to make efforts for increasing the domestic production of edible oils in which increasing area and productivity of oil palm plays an important part,” the cabinet secretariat said.

India imported palm oils—both crude and refined—worth $5.8 billion in FY21, mostly from Indonesia and Malaysia. The government said given the fact that around 98% of crude palm oil (CPO) is imported, the scheme proposes to increase the coverage of oil palm trees to 1 million hectares (ha) by FY26 from 370,000 ha at present. Production of CPO is expected to go up to 1.12 million tonnes (mt) by FY26 and up to 2.8 mt by FY30.

The Centre will contribute ₹8,844 crore, while states have to contribute ₹2,196 crore, including viability gap funding. “The scheme will benefit palm oil farmers, increase capital investment, generate employment, reduce import dependence and also increase the income of farmers,” the press statement said.

The government will also provide viability gap funding to protect farmers from international price volatility in crude palm oil by paying directly to farmers’ accounts in the form of direct benefit transfers. “This assurance will inculcate confidence in Indian oil palm farmers to go for the increased area and thereby more production of palm oil,” the statement said. The scheme will end on 1 November 2037.

To give impetus to the northeast and Andamans, the government will bear 2% of the CPO price to ensure farmers are paid at par with the rest of India. “The states that adopt the mechanism would benefit from viability gap payment proposed in the scheme, and for this, they will enter into MoUs with the Centre,” the statement said.

India is the world’s largest importer of palm oil, buying more than 9 million tonnes annually, mainly from Indonesia and Malaysia.