The other oil imports India needs to worry about

From a 10-year perspective, India’s edible oil imports have increased from 11.6 mt (valued at Rs 60,750 crore) in 2013-14 to 16.5 mt (Rs 138,424 crore) in 2022-23, with the jump pronounced in the last three years (table 1, below). During the previous 10 years between 2004-05 and 2013-14, imports had shot up even more, from 5 mt to 11.6 mt.

Dipping self-sufficiency

In 2022-23, India’s edible oil production from domestically grown oilseeds and alternative sources such as cottonseed, rice bran and maize/corn amounted to around 10.3 mt. Adding imports of 16.5 mt took the total availability to 26.8 mt, with the share of domestic production in this at only 38.6%.

Compare this to 2004-05, when domestic output, at 7 mt, exceeded imports of 5 mt and translated into a self-sufficiency ratio of close to 60%. “Last year, our availability (from imports plus domestic production) was more than the actual consumption requirement of 24-25 mt. We are projecting the latter to reach 30-32 mt by 2029-30. If adequate efforts aren’t taken to boost production, our annual imports could top 20 mt,” said BV Mehta, executive director of the Mumbai-based SEA.

That would further bring down the self-sufficiency ratio to a third or below.

Data on India’s edible oil imports and production over time. Additionally, data on inflation in vegetable oils domestically and globally.

Profile of domestic oils

Table 2 shows that the two biggest contributors to India’s edible oil production now are mustard and soyabean. At No. 3 and No. 4 are cottonseed and rice bran.

The kapas or raw un-ginned cotton harvested by farmers contains only about 36% lint, the white fluffy fibre that textile mills spin into yarn. The balance is seed (62%) and wastes (2%) that are separated from the lint during ginning. Cottonseed, in turn, contains 13% or so oil.

Higher yields from genetically modified (GM) Bt technology helped boost not only lint, but also cottonseed oil production from less than 0.5 mt to 1.5 mt between 2002-03 and 2013-14.

Falling cotton output and yields in recent times — from Bt technology’s diminishing effectiveness and the emergence of new insect pests has led to the production of its oil dropping too, to 1.25 mt in 2022-23.

Just as with cotton, there have been spin-offs from increased output of rice and maize, in terms of their byproducts. The oils extracted from bran (the outer brown layer of rice after removal of the husk and before polishing/whitening) and germ (the inside endosperm of maize grains separated during milling) have both seen significant production growth over the last decade or more. So has oil from domestically cultivated palm trees, albeit from a low base.

Among conventional oilseeds, only mustard has retained its sheen. While groundnut oil production has also grown, roughly half of its kernels are today either directly used for table consumption or exported. That leaves not much for crushing and oil extraction. It makes groundnut more of a dry fruit and less of an oilseed.

The other oils — coconut, sesame, sunflower and safflower — have all registered declines in domestic output. Although there are some premium homegrown brands — for instance, ‘Parachute’ coconut oil of Marico and ‘Idhayam’ sesame oil of the Virudhunagar (Tamil Nadu)-based VVV and Sons Edible Oils Ltd — these oils have struggled against the onslaught of cheaper imported oils.

The 16.5 mt of edible oil imports in 2022-23 included palm (9.8 mt; from Indonesia, Malaysia and Thailand), soyabean (3.7 mt; from Argentina and Brazil) and sunflower (3 mt; from Russia, Ukraine and Argentina). The bulk of imports comprise crude oils. Like crude petroleum, these are shipped in tankers and processed in giant refineries. Refining involves de-gumming (removing gums, waxes and other impurities), neutralisation (removing free fatty acids), bleaching (removing colour) and de-odourisation (removing volatile compounds).

Vulnerability to imports

A major side effect of high import dependence is the vulnerability of both producers and consumers to international price fluctuations. Edible oil inflation is India has broadly moved in tandem with global inflation. However, the extent of volatility — be it increases or decreases — is more in the latter’s case (see chart).

The UN Food and Agriculture Organization’s vegetable oils price index (base period value: 2014-2016=100) soared from 98.7 points in August 2020 to an all-time-high of 251.8 points in March 2022, the month that followed Russia’s invasion of Ukraine. The index has since plunged to 120 points in October 2023. Landed prices of imported oils more than halving — from $1,828 to $910 per tonne for crude palm and from $2,125 to $1,005 for sunflower between March 2022 and now — has also brought down retail edible oil inflation in India to negative territory since February this year.

Stepping up edible oil output from domestic sources will go some way in insulating Indian farmers and households from excess global price volatility. But that would require openness to technology — including GM hybrids in mustard and soyabean amenable to herbicide application — and the government providing some kind of price support to oilseed growers, whether through procurement or tariff policy.

Such assured minimum support price (MSP)-based procurement is currently available only for wheat and paddy. And with the main national parties — the BJP and Congress — competing to offer more than the Centre’s MSP for the two cereal crops in some states, there isn’t much incentive for farmers to switch acreages to oilseeds or pulses. Nor does the surging import bill on the two seem to be moving policymakers for now.