What’s cooking? Another surge in edible oil imports

Farmers hesitate to grow oilseeds as they cannot compete with the flood of cheap imports and lack of price support mechanisms.
Farmers hesitate to grow oilseeds as they cannot compete with the flood of cheap imports and lack of price support mechanisms.

Summary

After the spike in grain and pulse prices, edible oil looms as another risk in attempts to manage food inflation

Poor rains in major oilseed-growing states could lead to a production cut and record imports by the world’s largest buyer of cooking oil. After the spike in grain and pulse prices, edible oil looms as another risk in attempts to manage food inflation. Mint explains.

How are oilseed crops faring?

During the rain-fed kharif crop season (June to October) the major oilseed crops grown are soya bean and groundnut. Soya bean, which is the largest kharif oilseed, has been planted in more than 12.5 million hectares—marginally more than last year—but the crop is in a poor state due to a prolonged dry spell in major producing states such as Madhya Pradesh and Maharashtra. Similarly, erratic rains have impacted the groundnut crop in Gujarat and Karnataka. According to US-based Gro Intelligence, a farm data and forecasting company, a similar rainfall situation led to a 24% drop in soya production in 2017.

How much is India importing now?

Total imports of edible oils by India shot up 25% in the first nine months (November 2022 to July 2023) of the oil year 2022-23, as per the Solvent Extractors’ Association of India, or SEA, a processing and trade lobby. An oil year extends from November to October of next year. SEA is estimating that India could end up importing as much as 15.5 million tonnes of vegetable oil in 2022-23, surpassing the past record of 15.1 million tonnes in 2016-17. Palm oil from Indonesia and Malaysia comprise a bulk (59%) of cooking oil imports. In 2021-22, India’s edible oil import bill surged 34% to 1.6 trillion.

Graphic: Mint
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Graphic: Mint

Why is India so dependent on imports?

Home-grown soya bean, mustard and groundnut oil, among others, meet just 40% of requirement. Oilseed productivity of a tonne per hectare is less than half the global average, due to lack of access to the latest seed technology. Farmers also hesitate to grow oilseeds as they cannot compete with the flood of cheap imports and lack of price support mechanisms.

How are retail prices behaving?

Compared with the prices of most food items, the price of cooking oil has been on a decline—17% lower in July 2023, year-on-year—due to a surge in cheap imports, shored up by lower duties. But palm oil futures are on the rise on anticipation that India may import more. After hitting lows in May, prices firmed up by 19% early September. A drought in Argentina, the largest exporter of soya bean oil, and lower palm yields in South-East Asia due to El Niño can push prices higher, adding to food inflation worries.

What steps has the government taken?

The government lowered import duties and urged retail brands to slash prices as global prices fell earlier this year. As a long-term solution, India is also pushing production of oil palm in 15 states with a focus on the North-east and Andaman & Nicobar Islands. However, this will take time to show results. Last October, the biotech regulator also approved the environmental release of genetically modified mustard. However, the Supreme Court is yet to allow field trials of transgenic mustard.

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