Economics of oilseed production: Why India’s import dependence persists | Expert Views

The genesis of the persistent rise in imports of edible oils, regardless of steady increase in indigenous production, lies in the demand growing faster than the supplies. Most bids made over the past decades to address this issue have fallen flat. More than half the requirement of edible oils is still met through purchases from abroad.

Such heavy dependence on imports for a mass-consumed essential item like cooking oils is unwarranted. It is also dicey because the bulk of the imports comprise palm oil and its derivatives, sourced from just two countries — Indonesia and Malaysia. Any disruption in supplies from these countries, for whatever reason, can turn out to be a problem for India, the world’s largest importer of edible oils. Besides, vegetable oils are not something that cannot be produced locally in sufficient quantities.

Indian agricultural scientists have, in fact, already developed the technology needed to make the country self-reliant in edible oils. More than 1,000 high-yielding varieties and hybrids of oilseed crops have been evolved for cultivation in different agro-climatic zones. These have lifted the average productivity of oilseed crops from merely 4.8 quintals a hectare in the 1950s to around 14 quintals now. But there still is a huge disparity between the national average yield and the potential yield of new crop strains, which is as high as 20-25 quintals. Bridging, or even appreciably narrowing, this gulf can bring self-sufficiency in edible oils within reach.

However, agricultural pricing policies would need to be suitably tweaked to make oilseed crops economically as rewarding as their alternatives. Only then would the farmers be incentivised to expand the area under oilseeds, adopt new seeds and agronomic practices, and, most importantly, invest in yield-enhancing inputs like irrigation, fertilisers and plant protection chemicals. The existing pricing and procurement policies have tended to encourage farmers to grow relatively lucrative food and commercial crops on good-quality lands, pushing oilseed cultivation, in general, to the less fertile, non-irrigated lands. Nearly 75 per cent of the area under oilseed crops lacks irrigation facilities.

India is fortunate to have a vast diversity in vegetable oils, unmatched in the world. Apart from nine main oilseed crops, including groundnut, rapeseed-mustard and soybean, there are also perennial crops, such as coconut and oil palm, and some minor tree-based oilseeds grown mostly in tribal tracts. Besides, there is plenty of scope to augment supplies by extracting oils from non-conventional sources like cottonseed and rice bran, which are available in abundance. Some of these off-beat oils are far healthier than palm oil.

Focused efforts to achieve self-sufficiency in edible oils began way back in the mid-1980s with the setting up of the Technology Mission on Oilseeds (TMO) in 1986. This mission was able to jack up production to quite close to the requirement by the early 1990s. The main mantra for this success was to let domestic prices fluctuate within a reasonable range that protected the interests of both producers and consumers. The government’s intervention by way of increasing or decreasing import duties was restricted to situations when the domestic prices tended to breach the upper or lower limits.

However, this phase, termed ambitiously “the yellow revolution”, did not last long. One of the key reasons for that was the gradual erosion of the unbridled authority given to the TMO to formulate policies concerning pricing, imports, and exports of vegetable oils. Besides, the TMO was overloaded with additional responsibilities of promoting other crops, including pulses and maize. By the mid-1990s, the TMO was downgraded virtually to a broadbased scheme for promoting oilseeds, pulses, oil palm and maize. Unsurprisingly, therefore, none of these crops could get the kind of concentrated attention that was needed for their development. Though several avatars of oilseed technology missions have come into being since then, none of them could deliver the expected results for want of adequate autonomy and empowerment.

Thus, the real bane of the edible-oil sector is not the lack of technological breakthrough but the imprudent agricultural pricing and procurement policies. Unless the economics of oilseed cultivation is improved to let these crops be as remunerative as their potential competitors, the dependence on edible oil imports is unlikely to diminish. 

 
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