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National Edible Oil Mission Oil Palm Scheme

National Edible Oil Mission Oil Palm Scheme

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  • GS 3 || Economy || Agriculture || Agricultural Production & Productivity

Why in news?

  • Recently, the Prime Minister has announced a new national initiative on palm oil production to help increase farm incomes.
  • The scheme, called National Edible Oil Mission-Oil Palm (NMEO-OP), for self-reliance in edible oil, involves an investment of over Rs. 11,000 crore (over five years).

Objective

  • To explore and harness domestic edible oil prices that are influenced by costly palm oil imports.
  • Increase domestic palm oil production by threefold to 11 lakh MT by 2025-26.
  • This will entail increasing the area under cultivation of oil palm to 10 lakh hectares by 2025-26 and 16.7 lakh hectares by 2029-30.

Domestic production and  Import of  Edible Oil

  • According to the Agriculture Ministry during 2015-16 and 2019-20, domestic supply during this period has been much lower, within the range of 8.63–10.65 million tonnes.
  • 2019-20
    • Domestic availability of edible oils from both primary sources (oilseeds like mustard, groundnut, etc.) and secondary sources (coconut, oil palm, rice bran oil, cottonseed) are imported.
    • The domestic demand for edible oil is around 24 Million Tonnes (MT) while India produces only 11 Mt. 
    • Thus, 13 MT of edible oils is imported. 
  • Over-dependence on the international market for edible oils
    • India depends on imports to satisfy its demand.
    • Imported from Argentina and Brazil for soybean oil; Indonesia and Malaysia palm oil; and Ukraine and Argentina again for sunflower-seed oil.

Oilseeds Production in India

  • India cultivated oilseeds on 25 million hectares of land, producing 32 million tons of oilseeds in 2018-19, with soybean, rapeseed, and mustard, and groundnut accounting for almost 90 percent share.
  • Rajasthan is India’s top Rapeseed & Mustard producing state, followed by Madhya Pradesh and Haryana.
  • Almost half (48.12%) of Rapeseed and Mustard is produced by only Rajasthan.
  • India’s top Soyabean producing state in Madhya Pradesh with a share of 44% of India’s total production of this protein-rich crop.
  • Andhra Pradesh, Gujarat Haryana, Karnataka. Maharashtra, Rajasthan, Tamil Nadu, U.P, West Bengal contributing to oil production.

 Concerns related to Oilseeds

  • High seed cost
    • The major challenges in oilseed production are largely rain-fed conditions (70% area), high seed cost (Groundnut and Soybean),a smallholding with limited resources, low seed replacement rate, and low productivity.
  • Farmers suffer at the cost of import
    • Farmers in India are suffering as a result of increased imports of oilseeds.
  • Lack of Incentives
    • There is a lack of incentive for growers to improve agronomic practices.
    • The crop’s marketability is also limited because the price support mechanism is nearly non-existent.
  • Market competition
    • Over the last 25 years, liberal policies with zero or low duty rates and free-market operations have contributed to unrestricted imports.
    • This has worked against protecting domestic growers’ interests.
    • Frequent transfer of stock from Indonesia and Malaysia.
  • Stagnant Production
    • Despite huge demand, oilseed production in India has got trapped at 31-32 million tonnes. We need to break this stagnation and aim to increase the output by at least two million tonnes a year, if not more.
  • The burden on the government’s exchequer
    • In 2019, India imported around 15 million tons of edible oils worth approximately Rs 7,300 crore, which accounted for 40 percent of the agricultural imports bill and three percent of the overall import bill of the country.

Measures to be taken

  • Limit on veg-oil imports
    • Limiting veg-oil imports will reduce the number of arrivals and help domestic producers.
    • The ceiling should be reviewed every six months, depending on the exigencies of the situation.
  • Shortening the credit period
    • Many Indian importers frequently benefit from long credit periods.
    • They have 90-150 days to pay the cargo’s value to overseas suppliers.
    • This encourages over-trading and creates an endless cycle of imports.
  • Import Monitoring
    • Imports must be closely monitored in terms of contract registration, tracking arrivals, and so on.
    • This can help to increase the transparency of the trade.
  • Wide-scale adoption of improved agricultural technologies
    • Based on a rough estimate, 6 million tons of additional oils can be produced utilizing bridging the yield gap, assuming 1.5 tons per ha as a realizable yield.
  • Smart agriculture and Support to farmers
    • The farmers need to be made aware of all newer varieties and provided with access to good-quality seeds.
    • Ensuring availability of key physical (fertilizers, pesticides), financial (credit facilities, crop insurance), and technical inputs (extension services) in major crop ecological zones for oilseed crops
  • Market Reforms
    • Implement market reforms and policies, such as contract farming and public-private partnership in production and processing, to ensure a competitive market for oilseeds and edible oil along with adequate protective measures to avoid unfair competition from the international markets.

How India can becomeAtmanirbhar(self-reliant)?/Way forward

  • Reduction in Import dependence- The National Edible Oil Mission Oil Palm Scheme is expected to incentivize the production of palm oil to reduce dependence on imports and help farmers cash in on the huge market.
    • India is the largest consumer of vegetable oil in the world. Of this, palm oil imports are almost 55% of its total vegetable oil imports.
  • High Yields are expected with the implementation of the new scheme-India produces less than half of the 2.4 million tonnes of edible oil it consumes each year. The rest is imported, with palm oil coming from Indonesia and Malaysia, soy oil from Brazil and Argentina, and sunflower oil primarily from Russia and Ukraine.
    • In India, 94.1 percent of palm oil is used in food products, primarily for cooking. As a result, palm oil is critical to India’s edible oil economy.
  • Potential to increase the domestic production of oilseeds
    • It could reduce import dependence and also benefit the farmers.
    • The Technology Mission on Oilseeds and other policy initiatives have helped India increase the area under oilseeds in India from 9 million tons in 1986 to 32 million tons in 2018-19.
    • The initiatives like Oil Palm Area Expansion underRashtriyaKrishiVikas Yojana, increasing the minimum support prices of oilseed crops, creation of buffer stock for oilseeds, cluster demonstration of oilseed crops, etc. are being implemented by the government to boost the domestic production.
  • Policies focused on oilseed production
    • India needs to learn from countries like Malaysia and Italy, which have managed to sell their edible oil worldwide, which in return has contributed to their economy.
  • Alternatives
    • As rice bran oil is gaining popularity amongst urban consumers, as it is known to reduce the risk of heart diseases and type 2 diabetes.
    • Cottonseed is also a promising source of vegetable oil and has untapped potential. Approximately 1.4 Mt of oil can be augmented with cotton seeds

Conclusion

  • India has tinkered with tariff rates very frequently in the recent past depending on the demand-supply situation and domestic prices to regulate the imports and to protect the interest of the consumers.
  • However, this is a myopic strategy and in the long run, India will gain by having a stable export-import policy. For ensuring proper price signals to increase the domestic production of edible oilseeds, a stable tariff structure is needed. And in this regard, The National Edible Oil Mission Oil Palm Scheme is expected to incentivize production, with clear direction will provide clear price signals for different market stakeholders and boost the domestic production of oilseed crops.

Mains model question

  • Why is it necessary for India to import edible oils? What can we do to increase domestic edible oil production? Discuss

References