Edible oil processors upbeat on govt move

Subsidy and FDI norms eased to encourage palm plantations; industry predicts big changes for better

The area under palm plantations is likely to increase significantly in the coming years, with the government's relaxation in norms for subsidy and foreign direct investment (FDI), to promote sourcing of vegetable oil from domestic sources.

There are only a few large corporate entities involved in palm plantation, due to a long gestation period and the economic value. Normally, the first palm fruit can be obtained only after at least three years of planting. Therefore, only large corporates with deep pockets like Godrej Agrovet and Ruchi Soya Industries have evinced interest.

Consequently, the actual plantations have never achieved more than half the area targeted by the government. Automatically, therefore, the release of subsidy never exceeded half the allocation under this category. Dependence on imported vegetable oils (largely crude palm oil) continues to ben 55-60 per cent, on weak domestic investment in palm plantings and harvesting.

"These far-sighted steps will have benefits across the board that will unfold in the coming years. The government's drive to make India a self-reliant agri producer and a zero net importer of oil is now on course. Ruchi Soya is leading the palm oil sector cultivation in the country and faces immense pressure from importers of cheap oil. It is now for Indian agri-companies to rise up to the occasion and boost oil palm cultivation on a war footing to fight the demand-supply gap that is leading to net imports. The move will also encourage farmers to take up oil palm cultivation on a larger scale," said Dinesh Shahra, managing director at Ruchi Soya, one of India's largest palm planters with 200,000 ha under this crop.

 

Disappointed by the response from farmers and large agro-based corporates, the Union ministry of agriculture on Wednesday relaxed the norms on maximum threshold on land holding for grant of subsidy benefit and FDI. Earlier, farmers could get subsidy benefit only up to 25 acres of palm plantation. This limit has been relaxed. The government also allowed up to 100 per cent FDI in plantation. Approval was also given to revise the norms on assistance, mainly for planting materials, maintenance cost, inter-cropping cost and borewells, to make oil palm plantations attractive.

"We welcome the relaxation, which will go a long way in expanding the area under oil palm cultivation and production of palm oil," said B V Mehta, executive director, the Solvent Extractors' Association (SEA) of India.

The relaxation is expected to encourage oil palm plantation on a large scale by corporate bodies and to utiliwe wastelands. With this benefit, private entrepreneurs, co-operative bodies and joint ventures might show more interest for investing in oil palm plantation and availing of support from the National Mission on Oilseeds and Oil Palm.

The government has identified edible oil as a sector which coughs up huge foreign currency outgo, due to stagnant seed production and sustained growth in demand. The industry estimates annual domestic production at around nine million tonnes, against a little over 23 mt consumption. The annual import of around 14 mt costs Rs 68,000 crore (2015-16). Palm oil contributes 70 per cent of vegetable oil import and is one of the cheapest, due to high yield per hectare.