Indians are likely to buy expensive cooking oils from overseas for at least another 15 years, as demand continues to far outstrip domestic production.
Consumption is expected to rise in India by 17% over the next four years, according to BV Mehta, executive director of the Solvent Extractors’ Association. Such a steep rise would further widen the manufacturing gap: India is likely to produce around 10 million tonnes of edible oils in 2021-22, against local consumption of up to 23 million tonnes.
India, one of the world’s biggest buyers of vegetable oils, is struggling to wean itself off imports. Farmers have generally focused on growing cotton and staples like rice, wheat, and sugar, in part because the government sets price floors for these crops and buys some of them — like food grains — in exchange. big for its social programs.
A change in mentality is not likely overnight. High-yielding rapeseed and sunflower varieties and remunerative prices could boost domestic production. But the incentives for Indian farmers to grow oilseeds are still weak, according to Siraj Chaudhry, managing director and chief executive of National Commodities Management Services Ltd., a warehousing and trading company.
Change must start locally, he said, by closely monitoring the crop cycle. Rice farmers should be encouraged to grow sunflower during India’s rainy months, for example, and wheat farmers to grow rapeseed in winter. Higher production of rice bran oil and expensive peanuts could also serve as supplements, he said.
Palm oil, in particular, has the potential to close the production gap. Indians often prefer it over sweet oils because they are cheaper and can be mixed easily with other fats. It also lasts longer than other choices, making it cost effective for mass users such as restaurants and hotels.
Moving part of the supply chain locally can help. Commodity experts have been lobbying the Indian government to import soybeans and crush them domestically, rather than just buying soybean oil. This would potentially increase the supply of soybean oil at home and meet the growing demand for animal feed from the poultry industry.
“It has to be a combination of factors, including providing new technologies to increase productivity,” Chaudhry said.
The cost problem
Cooking oils are an integral part of the Indian diet. They play a prominent role in the feasts served at massive festivals across the country. They are used to fry jalebis, the sticky roadside candy, and for virtually every other staple. Their ubiquity has made India the world’s largest importer of palm, soy and sunflower oil.
Increasing domestic palm oil production would increase the overall supply of vegetable oil in the country, according to Mehta. India aims to produce 1 million tonnes by 2026 and further increase production to 2.8 million tonnes by 2030 from 300,000 tonnes, he said.
But price control is increasingly a ride. India’s attempts to dampen inflation by reducing duties on edible oil imports and imposing limits on stocks have so far failed to reduce costs. Most commodities are tied to world prices which have recovered over the past year due to a supply shortage and the increasing use of biofuels.
India’s consumer food prices rose in December at their fastest pace in six months amid soaring vegetable oil prices, which jumped more than 24% from a year earlier, according to the Ministry of Statistics. The increase comes despite a reduction in duties on imports of edible oils, which have further pushed up global prices on expectations of higher purchases from India.
Food prices are rising all over the world. Crops that can be converted into fuel have been particularly hard hit due to soaring crude oil prices. In Kuala Lumpur, the price of palm oil, the most consumed vegetable oil, rose by more than 30% in 2021. Soybean oil in Chicago saw a similar spike over the same period.
Meanwhile, in New Delhi, vegetable oils – such as those extracted from rapeseed, sunflower, soybean and palm – have increased from 12% to more than 30% in 2021, according to the food ministry.
Palm oil extended its gains to a new high on Monday. Benchmark futures in Kuala Lumpur rose 1.1% to 5,380 ringgit ($1,286) a tonne, the highest on record for the most active rolling contract. Rival Chicago soybean oil gained for a sixth day at 63.08 cents a pound.
“It will probably be better if the country can meet 60% to 70% of its demand from domestic production and the rest from imports, reversing the current trend,” Chaudhry said.
