Import dependence: Crop diversification can improve edible oil production

India is a significant producer of edible oil, accounting for 15-20 per cent of the global oilseed area, 6-7 per cent of production, and 9-10 per cent of consumption. Yet, about 57 per cent of India’s edible oil consumption is met through imports, rendering it vulnerable to global price fluctuations and supply disruption. In fact, India bought a record amount of edible oil in July this year, as refiners increased palm oil and soy oil purchases due to lucrative prices. In this regard, the NITI Aayog recently brought out a comprehensive report detailing India’s heavy reliance on oilseed import and outlook for the future. In 2022-23, for instance, India imported 16.5 million tonnes (mt) of edible oil, with domestic production fulfilling only 40-45 per cent of the country’s requirements. While the per capita consumption of edible oil in the country rose to 19.7 kg per year, self-sufficiency in oilseeds, attained through the Yellow Revolution during the early 1990s, could not be sustained for long.

In this context, the report highlights the need to diversify crop production away from cereals. However, incentives, including power and fertiliser subsidies, are extremely skewed in favour of paddy and wheat cultivation, discouraging farmers from switching away from these crops. Farmers in Punjab are now given a monetary incentive of Rs 17,500 per hectare to shift to less water-guzzling crops in the kharif season, but as agricultural economist Ashok Gulati and others have pointed out, this would not be enough. The profitability gap between paddy and oilseeds is much higher than what is being offered. It is being suggested that the amount needed to shift away from paddy will be around Rs 35,000 per hectare. In states like Punjab and Haryana, procurement agencies will also need to ensure the purchase of oilseeds at the minimum support price to minimise the market risk for farmers. In an effort to reduce the import bill, policymakers are also focusing on expanding palm oil cultivation. Known for its high yield, palm oil production in India reached 0.36 mt in 2021-22 from 0.079 mt in 2010-11. However, concerns remain since palm-oil plantations are a significant driver of deforestation, as is being seen across Southeast Asia. Wasteland utilisation for oil palm horizontal expansion — or the area dedicated to cultivation — as suggested by the report, can be a viable alternative in this case.

Demand forecasting made in the report projects that, owing to behavioural shifts in dietary patterns and food consumption, the demand-supply gap in edible oil is expected to widen to 29.5 mt by 2030 and 40 mt by 2047. To bridge the gap, the report suggests several strategic interventions, including bringing more land under cultivation for specific oilseeds and enhancing the yield of existing oilseed cultivation. Notably, the areas that remain uncropped during the rabi season represent a significant potential for horizontal expansion in edible oilseed production. Utilising just one-third of the rice-fallow area in the rabi season across 10 states has the potential to significantly enhance domestic production by up to 3.12 mt. By properly implementing these measures, India could achieve projected edible oil supplies of 36.2 mt and 70.2 mt, by 2030 and 2047, respectively, achieving self-sufficiency in the sector. Clearly, there is a need to adopt improved farming practices and advanced production technologies to raise productivity and output in the long term to be able to reduce dependence on import.