India is steadily moving further away from self-reliance in edible oils. While the country imported only about 10 percent of its edible oil requirement in the 1990s, more than 60 percent of domestic demand is now being met through imports. The Russia-Ukraine war and rising tensions in West Asia have once again raised questions about whether India made adequate and timely efforts to boost domestic oilseed production. According to Atul Chaturvedi, Chairman of the Asian Palm Oil Alliance, India is now paying the price of decades of dependence on cheap imports and neglect of domestic production in the form of higher prices and a rising import bill. In a conversation with Harvir Singh, Editor-in-Chief of Rural Voice, he spoke in detail about the edible oil crisis, palm oil, biodiesel, GM technology, and the impact of global geopolitical tensions on the Indian market.
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-With the country’s edible oil requirement rising steadily, imports have also increased sharply. In the 1990s, India imported only about 10% of its edible oil requirement, whereas today more than 60% of domestic demand is met through imports. The government launched the National Mission on Oilseeds and the Oil Palm Mission about three years ago. Where do we stand today?
During the 1970s and 1980s, food security essentially meant security in wheat and rice. Edible oils were never a priority. Around 1987, a Technology Mission was launched under Sam Pitroda. In my view, that was probably the only period when serious efforts were made in this sector. Within three to four years, oilseed cultivation expanded significantly. As a result, in the years following the 1990s, India imported only around 300,000 tonnes of edible oils annually. Today, consumption has reached 26 million tonnes, while imports have crossed 16 million tonnes.
Another important point is that until the 1980s, per capita edible oil consumption in India was only seven to eight kilograms annually. After the economy was liberalized in 1991, incomes increased and food habits changed. As a result, per capita consumption has now risen to around 19 kilograms per year. Consumption kept increasing, but the attention that should have been given to boosting oilseed production was never provided.
-India had once achieved nearly 90% self-sufficiency in edible oils, which has now fallen to below 40%. Instead of encouraging farmers to increase oilseed production, we continued to meet our requirements through imports. But when the Russia-Ukraine war began in 2022, edible oil supplies were disrupted and prices surged. Now, the Iran-US conflict is once again affecting supplies. What kind of preparation should have been made to deal with such situations?
The edible oil import sector in India is controlled by the private sector, which has greater flexibility. That is why the supply chain did not break down despite rising prices, not even during Covid. As far as prices are concerned, India is a ‘price taker’. If global prices rise, India also has to buy edible oils at higher prices. The weakening rupee has added to the pressure. You can say that imported inflation is affecting the edible oil sector.
I would also like to mention another point. In the early 2000s, I once asked the Agriculture Secretary of the central government why policymakers were not paying attention to oilseeds. Consumption in India was rising rapidly, but production growth was nowhere close to matching it. He replied that since the private sector had developed such an efficient supply chain, the government felt there was no need to focus much on the issue.
At that time, commodity prices were also very low. What is now priced at $1,200-1,300 per tonne was then available in the range of $500-600 per tonne. Palm oil-producing countries like Malaysia and Indonesia were looking for markets, so they supplied at highly competitive prices. As a result, policymakers did not focus on increasing domestic oilseed production, and we are paying the price for that today.
You mentioned the Oilseed Mission, but in my opinion, it has largely remained only an announcement. Around Rs 11,000 crore was allocated over five years for palm oil production, which works out to roughly Rs 2,000 crore annually. I believe nearly 70% of that may go toward expenses such as salaries. Even the funding for the palm mission is too small to create any major impact.
-Palm oil accounts for a major share of India’s edible oil imports. Now, sunflower oil and soybean oil imports are also rising sharply. We are effectively giving this market away to Latin American countries, the United States, Canada and even Australia. At the same time, the current geopolitical situation is pushing up crude oil prices. As a result, palm oil-producing countries are increasingly diverting palm oil towards biodiesel production, which could tighten global supplies further. What impact do you see from all this?
Look, Indonesia was already implementing B40, which means 40% palm oil-based biodiesel blending with diesel fuel. When crude petroleum prices were low, such blending targets were achieved mainly through government mandates. But now crude oil prices have risen so much that palm-based biodiesel has become commercially profitable on its own. The Indonesian government has now announced mandatory implementation of B50 from July onward. This means 1.5 to 2 million tonnes of palm oil will be diverted towards biodiesel production. Malaysia is also moving in the same direction, increasing its blending mandate from 10% to 15%.
Similarly, soybean oil from Argentina and Brazil is also being diverted for biodiesel production. At present, around 25% to 28% of global edible oil production is going into the energy sector. Therefore, unless India gives serious priority to self-reliance in edible oils, the current situation will continue. Unfortunately, the level of seriousness required to boost domestic oilseed production is still missing. Last year, India imported edible oils worth $19.5 billion. With prices rising further this year, it would not be surprising if the country’s edible oil import bill increases to $22-23 billion.
-You mentioned that 25-28% of edible oils are now being diverted to other uses. At the same time, the rupee has weakened, with the exchange rate nearing Rs 96 per dollar. What combined impact have these factors had on prices?
Compared to the situation before the wars and now, the impact has been around $125 to $150 per tonne. That is a significant difference. Edible oil that earlier used to cost around Rs 120 per litre in the wholesale market has now gone up to nearly Rs 150 per litre.
-Whether it is mustard or soybean, our productivity remains far below the global average. Shouldn’t technology play a bigger role in improving yields? Should India allow GM mustard? We have also not yet approved GM soybean. At one point, cottonseed oil had become our fourth-largest source of edible oil, but cotton production is now declining as well. What policy changes should the government consider in this situation?
India’s total soybean production today is between 11 and 12 million tonnes. Its yield is not even half of the global average. The Solvent Extractors’ Association has repeatedly urged the government to adopt modern technology. If GM technology can increase soybean production, why should it not be adopted?
Today, almost all the soybean oil and cottonseed oil being consumed in India is genetically modified in one way or another. Even the cottonseed cake fed to animals by companies like Amul comes from genetically modified cotton. In fact, it is difficult to find non-GM products anywhere in the world today.
As far as mustard is concerned, we had very strong genetically modified research led by Deepak Pental. He had demonstrated that GM mustard could increase yields by nearly 28%. But till now, we have not been able to implement it. In my opinion, if we do not pay serious attention to this issue, the situation will continue to worsen.
-If the situation in the Strait of Hormuz does not improve, fertilizer-related problems may continue. There is also talk of a possible Super El Niño this year, which could result in below-normal monsoon rainfall. In such a situation, what strategy would you suggest for the government, farmers, and consumers?
I am not giving too much importance to the Super El Niño at this stage because the geographical distribution of rainfall is far more important. Most oilseed cultivation in India depends on rain-fed areas. If states like Madhya Pradesh and Maharashtra receive reasonably good rainfall, there will not be much difficulty. But if that does not happen, the problems could increase. As far as fertilizers are concerned, I do not think there will be any major issue because the government had made preparations in advance.
However, I believe the Rabi season could face more challenges, especially because mustard is cultivated during that period. Mustard yields more oil compared to soybeans. If rainfall remains low, soil moisture will decline.
The Prime Minister has appealed to people to reduce edible oil consumption by 10 percent, and I think that could have some impact as well. I would also like to point out that the pace of growth in edible oil consumption in India has slowed somewhat. High prices and extreme heat have certainly affected domestic consumption. Therefore, it is possible that import growth may not be very high this year.
The industry has also played a role in increasing mustard production. When we realized that the government’s response was lukewarm, the Solvent Extractors' Association of India launched a Mustard Mission around six to seven years ago to improve yields. Some positive results are now visible, and mustard productivity has increased. Mustard production has risen from 7 million tonnes to nearly 12 million tonnes. Had this not happened, edible oil prices today could have touched Rs 200 per litre.
-Under the current situation, is there a possibility of further price increases?
A lot will depend on whether the Middle East conflict drags on like the Russia-Ukraine war. If the conflict continues for a prolonged period and disruptions in crude oil and fossil fuel distribution increase, then the recent rise in edible oil prices is unlikely to reverse. Indian consumers should now consider Rs 150 per litre in wholesale markets as the new normal. The era of edible oil prices at Rs 120-125 per kg is over.
I would also like to mention that palm oil production in India has shown some improvement. Production has increased from 400,000 tonnes to around 600,000 tonnes. Through your platform, I would like to urge the government that whenever it launches a national mission, adequate funding must be ensured. The customs duty collected on imports should be invested in oilseed development so that some real progress can be made toward the Prime Minister’s vision of self-reliance.