Business News/ Industry / Manufacturing/  Decoding the dilemma behind escalating cooking oil imports

Increased imports of cheap palm oil have helped cool consumer prices. But farmers have run into losses with home-grown mustard selling at below the minimum support price. It’s a tightrope walk for the government, as Mint explains:

How much is India importing?

In the six months between November 2022 and April 2023, palm oil imports jumped 53% year-on-year. This pushed imports of vegetable oils—which include sunflower and soybean apart from palm—to 8.1 million tonnes, an increase of 21% over the six-month period a year ago. India imported more palm oil from Indonesia and Malaysia as global prices fell and import duties were kept low. During oil year 2021-22 (November 2021 to October 2022) India imported 14 mt of vegetable oils, spending a staggering 1.6 trillion—up 34% year-on-year, and more than double what it spent in 2019-20 ( 71,625 crore).

What about consumer and farmer prices?

Russia’s invasion of Ukraine last year led to a rally in global food prices. As India imports 60% of its edible oil consumption, retail prices shot up. Global food prices have softened since then, with cooking oil prices falling by 45% in April this year. This came as a relief for Indian consumers as retail prices fell by 12.3% in April from the year-ago month. But farmers are running into losses. Wholesale mustard prices fell sharply, from 6,500 per quintal in May last year to less than 5,000 per quintal now. That’s lower than the government-announced minimum support price of 5,450 per quintal.

Why is India so dependent on imports?

Indian farmers plant several oilseed varieties like mustard, soybean, groundnut, coconut and sesame. But productivity—oil output per unit of land-- is very low compared to oil palm grown in South-east Asia or soybeans from Latin America. India’s import dependence has been rising after it adopted a liberal trade policy in the 1990s and lowered duties.

Graphic: Mint
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Graphic: Mint

Was India ever self-sufficient?

Yes, briefly in the early 1990s. Between 1986, when India adopted a technology mission in oilseeds and 1994, production of home-grown varieties doubled. Cooperatives were encouraged to plant mustard and farmers were paid a good price. The oil was sold under the brand name Dhara which was a runaway success. But gradually, cheap imports took over. Indian farmers were unable to compete and reduced the area under oilseeds. As a result, import dependence increased from 30% in 1998 to 60% now.

What is the current government policy?

The National Food Security Mission pushes cultivation of mustard, soybean and sunflower. In 2021, the govt launched a 11,000 cr-mission to achieve self-reliance in oil-palm. This is a mix of price assurance and planting help to farmers. But experts are divided. Oil palm is a long- gestation crop suited to tropical climates with year-round rains. But India is growing it in Andhra Pradesh and Telangana, and plans to promote in the ecologically fragile Andaman Islands and North-east.

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Updated: 24 May 2023, 01:43 AM IST
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