EDIBLE OIL MAYHEM

By Veerbhadra Patil, BASE University (Bengaluru)

The nation has made a spot among top 10 agricultural exporting countries but for edible oil it continues to rely on imports. USPTO defines edible or cooking oil as ‘ fat of plant, animal or microbial origin, which is liquid at room temperature and is suitable for food use.’ Recently, National Edible Oil Mission-oil palm, an initiative to achieve self-sufficiency in edible oil demand by promoting palm agriculture was given nod by the Cabinet. Before looking at the options for palm agriculture in India and the current ecosystem of oilseed agriculture, let's first look at the price mayhem in edible oil. 

Prices of edible oil have shown an upward trend

From the past few months, edible oil has put a dent in our pockets and this increasing price  is, in turn, driving up retail inflation. It is clear from the graph that during February-2020 to June-20 prices were almost constant and prices started to increase from July-2020 but not rapidly until November-2020. From December-20 the edible oil prices are on an unstoppable bull run. 

Edible oil is a vital part of our diet. India is a vast and diverse country, so diverse is our consumption pattern of edible oil. Indians being Indians  are very particular about which edible oil they want to consume and we can say regions have developed their specific preference. The northern and eastern part of India prefer mustard oil and folks of the northern plain also consume vanaspati, vegetable oil that is made by partial hydrogenation of palm. Groundnut is preferred in the south and western parts of India. Sunflower which was initially used for ornamental purposes, has been now a preferred choice as edible oil especially in Karnataka, Andhra Pradesh, and Maharashtra. Coconut oil is preferred in Kerala and the coastal parts of Karnataka.

The market share of edible oils palm, sunflower oil, soybean oil, sunflower oil, rapeseed – mustard oil, groundnut oil are 38 percent,13 percent, 22 percent, 13 percent, and 7 percent respectively [source: food beverage news]. The share of raw oil, refined oil, and vanaspati are roughly 35 percent, 60 percent, and 5 percent respectively[source: department of food and public distribution].

The per capita consumption of edible oil in the year 2019-20 was 18 kg per annum in India, whereas 19.6 kg per annum in 2018-19 [annual report 2020-21, dfpd]. The consumption of edible oil has increased over time as per capita consumption in 2009-10 was 14.1 kg per annum [OPAE, DAC, ministry of agriculture] and India for the past two decades has resorted to imports to fill the gap and feed its mass population. Let's look at the share of edible oil by self-sufficiency and imports and domestic production of edible oils.

The share of domestic production was 44.3 percent in 2019-20. The domestic production is mainly through traditional oil seeds namely mustard, groundnut, castor, coconut, and also soybean. These crops are not that high-yielding and also they are grown in areas that are rainfed and hence making it a risky task, therefore production is highly variable. Oilseeds once used to be the traditional crop of agricultural rich state Punjab, as we all know they have switched to wheat. Let’s look at soybean agriculture in Madhya Pradesh. Soybean farmers of Madhya Pradesh call it ‘yellow gold ‘ and its country's largest producer of soybean accounts for more than half of the country's production. In the current Kharif season, the farmers faced a shortage of soybean seeds and this made prices rise. seed shortage is not just the story of Madhya Pradesh farmers but farmers across India, across various oilseeds. Farmers complain that over years the productivity has decreased and this issue coupled with variation in weather conditions has made the life of soybean farmers miserable.

India imported 13.42 million MT of edible oil which is almost 56% in the year 2019-20. India imports palm oil from Malaysia and Indonesia, sunflower oil from Ukraine, and soybean oil from Argentina and Brazil. At the Chicago board of trade[CBOT], the closing price of soybean for July delivery was at $559.51 per tonne on May 24 against $306.16 at this time last year. Also, soybean oil is being promoted as a biofuel. 

India is both the largest consumer and importer of palm oil. The prices of palm oil in the international market have soared up. The hotel industry in India mainly uses palm oil and many households too are dependent on this relatively inexpensive oil. Last year we witnessed the government banning palm oil import from Malaysia owing to a diplomatic spat between the countries and later it was taken back. 

The domestic consumption of edible oil had increased during lockdown and demand was low by the hotel industry. Import duty cut on edible oil is suicidal for the domestic sector. Amidst this cabinet has passed the national edible oil mission-oil palm. Through this mission Rs, 11,040 crores will be invested for quality seeds to technology i.e. creating an ecosystem for edible oil. They argue that palm agriculture in northeast India and Andaman and Nicobar islands can be easily done. This will also provide employment opportunities in the food processing and transportation industry. On the other hand, many have termed the palm push in the northeast as an ecological threat.