The war between Russia and Ukraine has had a huge impact on the edible oil market, once again highlighting India’s vulnerability to the vagaries of the global food market.
Even before the war, global vegetable oil supplies had dwindled due to drought in South America, which led to a drop in soybean yields.
Palm production in Malaysia also declined due to the impact of Cyclone Rai in December 2021. Canadian rapeseed production for the 2021-2022 drought was down 35 percent from the previous year.
The war in Ukraine pushed agricultural prices to historic highs and raised concerns about global food security. As with many other commodities, the price of many vegetable oils was very high before the Russian invasion in February. Since then, the price of vegetable oil has risen by almost 30 percent on average.
India is the largest importer of edible oil (15 percent globally) with import values ranging from 66,000-1,41,000 crores.
Despite the government’s efforts to reduce the world’s dependence on edible oil, India will still need to import 72 lakh tonnes of edible oil worth ₹70,000 crore in 2030-31, which would be 23 per cent of the total requirement of 300 lakh tonnes of edible oil.
Independence of India
The data from the Oilseeds Division of the Ministry of Agriculture and Welfare shows that import dependence will come down to 23 per cent in 2030-31 from 52 per cent (2021-22), but India will still need cooking oil from other countries.
The result indicator presented by the Oilseeds Department shows that the oilseed area in the country will increase from 287.6 lakh hectares (2021-22) to 338.1 lakh hectares in 2030-31. The oilseed production will also increase from 385 lakh tonnes in 2021-22 to 602.2 lakh tonnes in 2030-31.
But at the same time, the country’s edible oil requirement will increase from 267.1 lakh tonnes in 2021-22 to 300 lakh tonnes in 2030-31. However, edible oil production will increase from 126.4 lakh tonnes to 228 lakh tonnes during the same period, leaving 72 lakh tonnes.
Palm oil (crude + refined) accounts for about 62 percent of total edible oil imports and is mainly sourced from Indonesia and Malaysia, while soybean oil (22 percent of total imports) is imported from Argentina and Brazil.
Sunflower oil (15 percent of total imports) is mainly imported from Ukraine and Russia. International prices of edible oil are under pressure due to lack of global production and increase in export duties/fees of the exporting countries.
Consumption on the rise
In the 1980s and 1990s, per capita consumption of edible oil was 6-7 kg per person per year. India was more or less self-sufficient in meeting that need.
According to government data after 2000, there was a boom in the consumption of cooking oil throughout the country. Per capita consumption which was 7.3 kg/year in 1994-95 increased to 18.3 kg/year in 2014-15.
This led to increased demand. the production of oil seeds in the country could not keep up with the increased demand. Interestingly, the Indian Council for Medical Research (ICMR) recommends 30g per person per day of cooking oil – that’s 12kg per person per year.
In India, soybean contributes the most to oilseed production, while rapeseed and mustard produce the highest edible oil due to their high oil content (40 percent). Palm oil is the most consumed oil, but 96 percent of it is imported. Soybean, mustard and sunflower oil are other main edible oils consumed in the country.
The government has been implementing a centrally sponsored scheme, National Food Security Mission – Oilseeds and Oil Palm (NFSM-OS and OP) from 2018-19 to increase production and productivity of oilseeds in the country.
The government has also launched a special mission for oil palm namely National Mission on Edible Oils (Oil Palm) – NMEO (OP) in 2021-22.
Both NFSM — Oilseeds and NMEO (OP) are implemented in the country with the aim of increasing the supply of edible oil by increasing the production and productivity of oilseeds and oil palms and reducing the import burden.
To contain the steady rise in edible oil prices — as the government had earlier reduced the basic duty on crude palm oil, crude soybean oil and crude sunflower oil from 2.5 percent to zero — the agricultural duty on these oils has been reduced to 5 percent.
Yield gap analysis
Oilseed growers and oil producers stress that the government must address micro-irrigation, quality seeds, market infrastructure and government policies to reduce dependence on imports. Technology and marketing support to farmers are key to increasing oilseed production, experts said.
According to the government, there is a huge potential to increase the yield of nine oilseeds by adopting the technologies already available. The productivity (yield) gap between improved technology and farmer practices ranged from 21 percent in sesame to 149 percent in sunflower.