An Aatmanirbharta Challenge

Context: Move to promote oil palm is welcome, but incentive structure that favours rice, wheat must change.

Need for new policy on edible oil

• A step towards correcting the agri-system that is biased towards wheat and rice: The policy bias is evident as India has huge wheat stocks along with massive edible oil imports.
• High edible oil import dependence: 60% of edible oil consumed is being imported. In FY 2020-21, edible oil imports touched Rs.80,000 crore.
• Risk of inflation: Edible oil inflation in July 2021 was 32.5%.
• Raising farm productivity: Oil palm is the only crop that can give up to four tonnes of oil productivity per hectare under good farm practices.
• Huge potential: The National Re-assessment Committee (2020) has identified 28 lakh hectares suitable for oil palm cultivation in the country — the actual area under oil palm cultivation, as of 2020, is only 3.5 lakh hectares.
  • Much of this (34 per cent) is in the Northeastern states, including Assam, followed by Andhra Pradesh (19 per cent) and Telangana (16 per cent).

About National Edible Oil Mission-Oil (NEOM-OP)

• 11,000 crore package, focusing on productivity and area expansion by supporting the farmers: NEOM-OP aims to bring an additional 6.5 lakh hectares under oil palm by 2025-26.
  • An input assistance of Rs.20,000-29,000/ha for planting material, additional assistance of rupees 12,500/ha for the four years to cover maintenance/opportunity costs of farmers, with no limits on acreage.
  • A Rs.5 crore assistance to industries that plan to set up 5 tonnes/hour processing unit.
  • Assistance of Rs. 100 lakhs to seed gardens in the Northeast for 15 hectares.
• Pricing formula for fresh fruit bunches (FFB) of oil palm: No MSP, but the FFB price for farmers would be fixed at 14.3% of average landed CPO price of past five years, adjusted with wholesale price index. 

Challenges associated with the policy

• Relative incentive structure still remains in favour of wheat/rice: Given that, government has MSP as well as massive procurement programme for wheat and rice.
• Self-sufficiency in edible oil still long way ahead: NEOM-OP brings an additional 6.5 lakh hectares under oil palm by 2025-26, but achieving self-sufficiency in edible oil production through the other oilseeds complex.
• Import-risks: Addressing price risk will require countercyclical import tariff policy to protect the farmers in case landed prices fall below the cost of production.
• Capacity challenge: Ensuring proper inputs to farming production, irrigation management and concrete farm infrastructure are essential for any structural shifts in cropping pattern.

Conclusion: NEOM-OP shall be viewed as a stepping stone towards devising a crop-neutral incentive structure where cropping patterns are aligned with demand patterns, and the crops being produced in a globally competitive manner.