India is a leading importer of edible oil in the world today and buys most of the oil that it consumes from other countries. This may come as a surprise to many as edible oil is an indispensable part of all Indian kitchens. The country has diverse agro-climatic regions and a large percentage of the population is dependent on agriculture. Still, India is not producing all the oil it needs.
According to experts, the edible and vegetable oil sector is expected to exhibit strong growth during the next five years. The demand in this domain has demonstrated a steady increase with a CAGR of 4.96% over the period 2001 to 2015.
Market drivers of edible oil in India
- Dietary habits of Indian households that dictate the use of the best cooking oil
- Increase in disposable incomes in the country
- The rise in urbanization rates
- Growth in the food processing sector in India
- Consumer health concerns about coronary heart diseases, obesity, diabetes, etc., with a corresponding rise in demand for healthy edible and vegetable oil.
India is dependent on the international market to cater to this demand
In 2018-19, India produced 32 million tons of oilseeds cultivated on 25 million hectares of land. The major oilseeds grown were soybean, rapeseed, mustard, and groundnut. According to estimates and assuming that a 28 percent oil recovery as a national average, 8.4 million tons of edible oils can be obtained from 32 million tons of oilseeds. The total demand is far more than what can be met from domestic production. This makes the import of edible oil necessary.
In 2019, India imported 15 million tons of edible oils. The major oils imported that year were palm oil sourced from Indonesia and Malaysia, soya oil from Argentina and Brazil, and sunflower oil from Ukraine and Argentina.
Dependence on imports of this commodity causes the following
- The significant burden on the government’s exchequer
- Price volatility impacts both consumers and producers
India has the capability to increase the domestic production of oilseeds and the government has been taking several policy initiatives to enhance the production of edible oilseeds in the country.
How to deal with supply constraints
Wide-scale adoption of improved agricultural technologies: These can narrow down the yield gap and lead to a production of 3.6 million tons of additional oils.
Increasing use of high-quality seeds: Farmers need to be made aware of newer varieties such as Pusa 12, JS 20-34 of soybean, and Pusa double zero 30 and 31 of mustard to enhance yields.
Utilization of fallow land: Use of fallow land to grow oilseeds such as safflower and mustard crops, which don’t need much water can expand the area under oilseed crops and lead to an increase in yields.
Alternative options: Production of rice bran oil can be boosted, which is gaining popularity among urban consumers as it is known to reduce the risk of heart attack and type 2 diabetes. Another untapped potential for edible oils is cotton seeds and oil palms, which can help India increase its supply of edible oils for domestic consumption.
In 2020-21 the import of edible oil in India is expected to fall to 13.1 million tons from 13.2 million from last year due to the economic slowdown and demand squeezed by record prices. The country would need to produce 17.84 Mt of vegetable oils to cater to the requirements of its population of 1685 million by 2050.