The other oil imports India needs to worry about

The other oil imports India needs to worry about

Context- India’s edible oil imports have risen almost 1.5 times and more than doubled in rupee value terms during the last 10 years.

Imports of vegetable oils — used in cooking and frying of foods, as opposed to petroleum fuels — touched a record 16.5 million tonnes (mt) in the year ended October 2023, according to data from the Solvent Extractors’ Association of India (SEA).

(Credits- Mint)

While up from the 14 mt of the 2021-22 oil year, the value of imports fell both in dollar (from $19.6 billion to $16.7 billion) and rupee (Rs 156,800 crore to Rs 138,424 crore) terms, on the back of a crash in global prices.

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

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.

(Credits- Indian Express)

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.
  • 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.
  • 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 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
  • 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.

Conclusion- 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.

Syllabus- GS-3; Economy

Source- Indian Express