Boosting palm oil output – The Hindu BusinessLine

Boosting palm oil output - The Hindu BusinessLine

India is the world’s largest importer of edible oils. Imports formed more than 60 per cent of edible oil demand in the country during oil year 2022-23 and palm oil constitutes around 38 per cent of edible oil demand in the country.

Our present production of crude palm oil (CPO) is less than half a million tonne. Domestic production of CPO needs to accelerate significantly in next three years.

Andhra Pradesh (AP) and Telangana State (TS) account for more than 60 per cent area under oil palm (OP) and balance is distributed across 10-12 States.

Assurance to Growers

Private entrepreneurs play a complementary role. The government’s regulatory and supportive role fosters a healthy environment between growers and processors for oil palm development.

Oil Palm Developers play the role of facilitator for disseminating technology and ensuring efficiency in the use of government funds.

This results in cost minimisation, profit maximisation and optimal use of resources which are needed in competitive environment in the context of liberalisation and Climate Change.

Keeping in view of volatility of CPO price, a simplified formula of support price under National Mission on Edible Oils – Oil Palm (NMEO-OP) was declared for the price of Fresh Fruit Bunches (FFBs) of OP at 14.3 per cent of CPO price in August 2021.

If the payment to OP growers by the industry is below the viability price, the Centre provides a gap funding to ensure that the growers payment reaches the viability price.

This support scheme is subject to States signing MoUs with the Centre.

Except AP and Telangana, other States signed MoUs with the Centre. AP and Telangana have their own payment system.

On February 23, 2024, the Viability Price Fixation Committee under the Union Ministry of Agriculture declared the viability price for FFBs of oil palm for the Oil Palm Year 2023-24 (November’23 to October’24) at ₹13,652 a tonne.

Mitigating risks

There are certain risks, like physical risk in terms of FFB Price realisation owing to CPO price volatility, transition risk due to climate change and regulatory risk.

So, we need a sound adaptation plan. Corporate houses prepare their “Business Responsibility and Sustainability Report (BRSR)” accordingly.

However, there is a need to review and compare the existing price mechanism versus Income per Ha., specifically in AP and Telangana. This could be a promising approach and may also facilitate crop diversification.

A price stabilisation fund can be set up to guard against the price volatility of FFBs.

Increase in income and right to fair price is the way to go forward. NMEO-OP is a promising scheme and regulatory authorities should review it periodically.

Bridging the gap

Despite the increasing domestic production of oilseeds, the supply-demand mismatch in edible oils continues.

This gap may further widen further with the increasing purchase power of consumers, especially when India becomes a $5 trillion economy in the next couple of years.

To reduce the gap between demand and supply, we need to increase domestic production of edible oils.

Palm oil is the highest oil yielding crop at 4 tonnes a hectare.

Paddy farmers need to shift towards oil seed crop and other value-added crops like oil palm to earn higher price realisation.

Of course, there is gradual shift in trajectory involving small and marginal farmers towards crop conversion.

The writer is former CEO-Oil Palm Plantation, Godrej Agrovet Ltd.

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