EVEN though India is hugely dependent on imports of edible oil at present, there are signs that the country’s oilseeds production will shoot up over the coming years, reducing its huge dependence on imports.

While total demand for edible oil was estimated at 24 million tonnes in 2015-16, India imported about 15m tonnes last year — at a hefty cost of 650 billion Indian rupees (around $10bn) and adding up to 2.5 per cent of its total import bill — to meet the growing demand for the oil.

The ICRA, a leading investment and credit rating agency — and now a Moody’s Investors Service company — estimates that India’s imports of edible oil could decline from 60pc of consumption at present to about 55pc by fiscal 2022.

India is today one of the largest importers of palm oil and soybean oil, buying almost 70pc of its edible oils from abroad

Reflecting even more confidence about the prospects for the edible oil industry in the country, the Indian Council of Agricultural Research (ICAR), an autonomous outfit under the department of agricultural research and education (and part of the ministry of agriculture), affirms that the government aims to raise oilseeds production by 40pc over the next five years.

The Indian Institute of Oilseeds Research (IIOR), a Hyderabad-based unit of the ICAR, says an action plan has been set up to bring an additional 3.5m hectares under oilseeds production over the next five years.

“We are targeting to increase average productivity to 1,500kg per hectare, from 1,225kg per hectare at present, over the next five years through good agricultural practices,” said A. Vishnuvardhan Reddy, director of the IIOR. His institute has identified more than 17m hectares of fallow land, which can be brought under oilseeds cultivation.

In crop year 2016-17 (July-June), India produced more than 32m tonnes of oilseeds on more than 26m hectares of land.

Mr Reddy believes that by raising domestic production of oilseeds, India’s dependence on imported vegetable oils — which added up to nearly 15m tonnes in 2016-17 and cost almost 750 billion rupees — would decline from the current 70pc of total requirements to 50pc. The country could also become self-sufficient in vegetable oil in about 10 years, he says.

India is today one of the largest importers of palm oil and soybean oil, buying almost 70pc of its edible oils from abroad. Palm oil accounts for more than half of its edible oil imports.

Fortunately, the industry is confident that imports will decline for the first time in nearly a decade this year. The Solvent Extractors Association of India (SEA) says that oilseed output jumped in 2016-17 to more than 38m tonnes and is expected to rise even more in the current year.

Fears of a fall in India’s imports have already led to a decline in crude palm oil prices this year. The Indian government had earlier doubled the duty on crude palm oil to 15pc and on refined oil to 25pc (from 15pc) to curb imports.

Despite these efforts, the country’s inventory of oilseeds — adding up to almost 1.5m tonnes — will be the highest in recent years.

INDIA imports huge quantities of palm oil from Malaysia and Indonesia and significant quantities of soybean oil from Argentina and Brazil.

But demand for edible oil is surging, even as the standard of living keeps improving over the years. According to the SEA, with the economy doing well and income levels going up, per-capita edible oil consumption has risen to around 17kg.

“During the 1990s, our dependence on imported oils was only about 3pc of our overall consumption,” says an SEA report. “However, this has now ballooned to about 70pc.”

Estimates are that consumption of edible oil will rise from 18kg per year (already considered to be high) to 22kg by 2022.

The ICRA believes that the key to improve oilseeds production in the country is in ensuring availability of quality seeds, bridging the awareness gap in farmers regarding better techniques, developing supportive infrastructure facilities and ensuring an efficiently managed market for better price recovery.

“New location-specific, high-yielding varieties should be developed,” says an agency spokesperson. “Investment in oilseeds research and development is a key element and should be stepped up. The dissemination of technology is equally important and needs to be strengthened through effective agricultural extension system.”

Indeed, the huge potential for growth for edible oil has seen multinationals such as Cargill Foods taking a keen interest in the segment. Cargill Foods India is expanding its food retails business, adding edible oil brands to its list.

According to Deoki Muchhal, managing director of Cargill Foods India, annual consumption of edible oil in the country is expanding by about 5pc, though demand for packed edible oil is growing by a hefty 15pc to 18pc.

Interestingly, India’s production of edible oil in the current crushing season (November 2017 to October 2018) is expected to be at record highs. It is likely to surge to 7.66m tonnes from 7.05m tonnes last year.

And with nearly 2.5m tonnes of opening stock, edible oil stocks would top 10m tonnes for the first time in the country’s history.

B.V. Mehta, executive director of the SEA, notes that while oilseeds acreage was said to be lower in the Kharif season this year, the prospects for growth in the Rabi season are high.

The US Department of Agriculture had warned last month that India’s palm oil and soybean oil imports were down by 100,000 tonnes each because of higher tariffs. Meanwhile, global oilseed production for 2017-18 has been projected higher at almost 580m tonnes thanks to rising production in the United States and Bolivia.

Lower imports by India this year — and possibly over the coming years — will reduce the international price of both palm oil and soybean oil in the future.

Published in Dawn, The Business and Finance Weekly, October 9th, 2017