Revitalising the Oilseeds Sector

India is one of the largest consumers of vegetable oils in the world, with a rapidly growing population and increasing demand for edible oils. However, the country's domestic production of oilseeds has not kept pace with this demand, leading to a heavy dependence on imports.

India imports vegetable oil worth more than USD 14 billion to meet chronic domestic shortages, but it intends to boost domestic production and reduce reliance on imports by increasing domestic production.

In the near future, it is necessary for the country to develop significant self-sufficiency, but for the time being, imports are unavoidable. However, the current import strategy prioritizes the benefit of consumers and disregards the welfare of local oilseed farmers.

In order to be effective, a holistic policy must judiciously balance the interests of consumers and growers. There is a need for comprehensive policy action due to looming risks such as land constraints, water shortages, and climate change.

Why is India not Self-Sufficient in Oilseed Production?

• Land Fragmentation:
  • One of the major challenges in oilseed production in India is land fragmentation.
  • Indian farmers have small landholdings, which makes it difficult for them to adopt modern farming techniques, machinery and technology.
• Low Productivity:
  • Oilseed yields in India are relatively low compared to other countries. The productivity of oilseeds is hampered by poor seed quality, lack of irrigation facilities, inadequate use of fertilizers, and insufficient research and development efforts.
• Climate Variability:
  • The climate in India is diverse, and the crop productivity is highly dependent on the availability of water, temperature, and other environmental factors.
  • India has witnessed significant changes in rainfall patterns, which have adversely affected oilseed production.
• Lack of Storage and Distribution Infrastructure:
  • India has limited storage and distribution infrastructure, which results in significant post-harvest losses.
  • This, in turn, discourages farmers from producing oilseeds, as they do not have the necessary infrastructure to store and sell their produce.
• Dependence on Imports:
  • India is heavily dependent on imports for edible oils, and this has affected the competitiveness of the domestic oilseed industry.
  • Low import tariffs and high domestic taxes have also made imported oil cheaper than domestically produced oil.
• Lack of Government Support:
  • The Indian government has not provided enough support to the oilseed sector, in terms of research and development, extension services, and financial support.
  • The government has also not encouraged private sector investment in the sector.

How can India boost Domestic Production?

• Enforcing Area Expansion:
  • Encourage area expansion through incentivized crop rotation in high-input grain mono-cropping regions like Punjab, Haryana, and western Uttar Pradesh.
  • By promoting crop rotation, farmers in these regions can grow more oilseeds, increasing their yields.
• Adopting Multiple Technologies:
  • Incorporate multiple technologies, such as information technology, satellite technology, nuclear agri-technology, and nanotechnology.
  • By adopting these technologies, farmers can increase their yields, improve the quality of their crops, and optimize their land and water usage.
• Work towards a Breakthrough in Seed Technology:
  • Investing in research and development to improve seed technology can lead to the creation of high-yielding and disease-resistant seeds, which can boost the production of oilseeds.
• Implementing a Robust Procurement System:
  • A robust procurement system can provide a guaranteed market for farmers, thereby encouraging them to grow more oilseeds.
• Tapping the Potential of Non-Conventional Oil Sources:
  • Tap the huge potential of non-conventional oil sources like cottonseed, rice-bran, and tree-borne oilseeds. By utilizing non-conventional oil sources, the country can diversify its oilseed production and reduce its dependence on traditional sources.
• Regulating and Monitoring Imports:
  • Currently, policy interventions are often reactive and knee-jerk, and lack supportive data.
  • A simple administrative system of ‘Import Contract Registration’ and monitoring of arrivals will remove the opacity in trade and facilitate data-driven decisions by India.
• Cutting down Credit Period to 45 days:
  • Long credit period of 90-120-150 days encourages over-trading and speculation.
  • Some Indian importers are already in a serious ‘import debt trap’ because of rampant over-trading. Also, Bank loans to importers can turn into Non-Performing Assets (NPAs) anytime.
  • Reduced credit period will automatically slow the pace of import and make the importer more responsible and accountable.
• Bring Cooking Oil under PDS:
  • Support vulnerable sections of consumers with supply of edible oil under welfare programmes at subsidised rates.
    • Public Distribution System and private trade supplies can co-exist and help advance consumer interest.
• Creating Processing Industry Modernisation Fund:
  • Many of the 15,000 oilseed crushing units and 800 solvent extraction plants are intrinsically inefficient in terms of scale, equipment, technology and productivity.
  • A modernised industry will capture greater value and create potential to attract foreign direct investment.

Drishti Mains Question What are the factors contributing to India's inability to achieve self-sufficiency in oilseed production, and what steps can be taken to increase domestic production and reduce the country's reliance on imports?