Industry
Decoding the dilemma behind escalating cooking oil imports
Summary
In the six months between November 2022 and April 2023, palm oil imports jumped 53% year-on-year
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.
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.
