Status of Oil seeds in India

India is a potential market for edible oils because of its domestic consumption. However, the deficit between production and consumption of edible oils is increasing rapidly, even after importing millions of tonnes of oil. The government should increase the oil seed production and solve the problems faced by the edible old market. Due to import of edible oil, there is also a hefty burden on Current Account contributing to the deficit.

 

Edible oils are the dietary source for energy, growth and healthy functioning of human life. In addition, edible oils put high emphasize on tasty food, improving texture of food items, increasing palatability of food, flavor of food maintenance. Thus, edible oils constitute an important component of food expenditure in house-holds. Edible oils comprised a dominant component of food expenditure in Indian kitchens. India comprises 25% of the population suffering from cholesterol and heart related diseases. The inclination of Indian consumers has increased towards edible oils because of the pursuit for low fat and low absorb oil. India is appropriate for growing all major oil seed crops due to its ago-ecological diversity. The major oil seed crops cultivated are ground nut, mustard, sunflower, sesame, safflower and Niger. India is one of the largest producers and consumers of edible oils in the world.

 

INDIA’S EDIBLE OIL MARKET

India has the fifth largest edible oil economy in the world which accounts for 4% of global vegetable oil production, 12% of global consumption and 21% of globally traded volumes. Even though India occupies a prominent position in the global oil seeds production more than 70% of India’s edible oil demand is met by imports and it is projected that India may need to import 14 million tonnes of edible oil by the year 2020. Indian Oil seed production is about 25-26 million tonnes leading to 10.75 million Ton of edible oil. This deficit of 14 million tonnes in demand and supply is met by imports. India primarily imports edible oil from Indonesia, Malaysia, Argentina and Brazil.

 

Consumption of major edible oils in India stood at 24.10 million tonnes (MT) in 2017, and was valued at Rs 1.4 trillion. Domestic production met only 30% of that demand; the rest was imported. The demand for edible oils in India has shown a steady growth at a CAGR (Compound annual growth rate) of 5%. The oil seed cultivation need to be promoted to under utilized farming locations such as the eastern India, where more than 15 million hectares under low land rice is one of the opportunities for increasing the area under oil seeds. The inter cropping technique can be used in nearly 45 million hectares under widely spaced crops like sugarcane, maize, cotton etc. Extending oil seed cultivation to under utilized farming locations such as the rice fallows of eastern India and in some coastal regions, where more than 15 million hectares under low land rice is one of the opportunities for increasing the area under oil seeds.

 

Market Drivers

There are several growth drivers in the edible oil market in India;

 

  • Growing awareness of health: The edible oil market is experiencing a considerable growth owing to the rising consumer awareness about health benefits and strong economic growth. Western lifestyle is being increasingly adopted which has credited to be one of the biggest factors driving the market.

 

  • Rising affordability of branded products: The global financial crisis, several poor harvests and the reduction in import duties on edible oils forced several small-scale players to close down or be taken over by larger players. Multinational players in the domestic market included Adani Wilmar Limited, which offers a large product portfolio of edible oil variants. The branded products are very widely accepted in India due to their high quality and reasonable price. The competition in the oil industry limits the price structure of different brand structure of edible oils.

 

  • A shift from vegetable oil to Palm oil and Soy Oil: The Edible oil market in India has witnessed a growth in recent years on account of rising demand for variants of edible oil fueled by expansion in the production. The surge in growth is majorly originated from growth in palm and soybean as a segment of the edible oil market. The growth in this segment has been largely led by the domestic factors such as growing preference for healthy oils, growth in population base, a shift in consumption pattern towards branded oil and favorable government policies.

 

CHALLENGES

 

The annual oil seed production of the country is faced with a high degree of variation, as nearly 76% of the oil seeds area is under rain-fed conditions and therefore subject to uncertainties of moisture availability. Availability of quality seeds of improved varieties and hybrids is grossly inadequate and is one of the major constraints in enhancing the oil seed production. Although there is enough breeder seed production of most oil seed crops, further seed multiplication through foundation and certified stages are the key constraints for availability of quality seed material. There are energy-rich crops but in India, they are mostly grown under energy-starved conditions. No use or low use of plant nutrients is one of the most important factors for low productivity of oil seeds. The nutrient requirement of oil seeds in general is high. All the nutrients need to be supplied in adequate quantities for attaining high yields.

 

Oil seed crops are prone to damage through 64 major diseases. This indicates the tack of genetic insulation against the majority of the diseases. Cultivars with a high level of resistance are available for rust and downy mildew in sunflower; powdery mildewin rapeseed-mustard; rust in linseed; wilt and root rot in castor and mosaic disease in soyabean. Growing population, economic growth and rising disposable income will drive India’s vegetable oil consumption growth, which is expected to grow by three per cent annually to exceed 34 million tonnes by 2030, according to a report. “Increasing income, urbanization, changing food habits and deeper penetration of processed foods will be key drivers of future consumption growth of edible oil in the country,” Rabo Research report ‘The Future of India’s Edible Oil Industry: How Will India’s Vegetable Oil Demand Shape Up by 2030’. The country’s vegetable oil consumption was at 23 million tonne in 2017, it added. Because of current stagnant domestic vegetable oil supplies, import volumes will continue to fill the majority of the supply-and-demand gap over the next decade, it added.

 

Palm oil, soy oil and sunflower oil are expected to penetrate regional markets further in the future, with the packaged edible oil segment leading the way for future growth of the industry, the report said. Domestic oil seed production growth can’t keep up with rising demand. Rising demand and stagnant domestic vegetable oil supply, which has been range bound between 6.5 million tonne and 8.5 million tonne in the past decade, will push the country’s vegetable oil imports to over 25 million tonne by 2030, from 15.5 million tonne in 2017. Driven by low domestic supplies, palm oil, soy oil, and sunflower oil will continue to represent more than 98 per cent of total vegetable oil imports, the report said. Palm oil from Malaysia and Indonesia will continue to take the lions share at 60 per cent of total imports in 2030, followed by South American soy oil taking a 24 per cent and sunflower oil from the Black Sea Region at 14 per cent market share, respectively, it added.

 

Soybean and sunflower oil import volumes into India will continue to grow at a five per cent annually despite their price premium over palm oil, due to a shift in domestic demand and consumer preferences for quality, it said. However, the report said, palm oil will continue to be the largest imported vegetable oil because of its price advantage, the price sensitivity among the low-income population, consumption growth in the fast-moving consumer goods (FMCG) sector, blended vegetable oil segments and increasing out-of-home consumption. The packaged branded edible oil sector in retail currently, which accounts for 40 per cent of total edible oil consumption, will continue to grow between 6-8 per cent annually over the next five years, it added.

 

PRESENT TREND

 

  • Importers stopped buying from Malaysia fearing India’s action against Malaysia after it criticized India’s decision to abrogate Article 370 in Jammu & Kashmir at the United Nations.

 

  • Trade sources revealed that India’s dependence on palm oil from Malaysia fell sharply after the Government imposed a 5 per cent safeguard duty on RBD Palmolein/Palm Oil of Malaysian origin last month. As a result, imports for November and December turned towards Indonesia.

 

  • Earlier Indonesian palm oil had a majority share — about 70 per cent — in overall palm oil imports, while Malaysian imports had a 30 per cent share. But due to a duty difference benefit in favour of Malaysia, its share went up to 50 per cent. However, after the recent safeguard duty, there is no incentive to import from Malaysia any more. Due to this reason, the latest uncertainty around India’s possible action against Malaysia will not affect overall edible oil supplies or availability in the country.

 

  • Currently, the buyers are resistant to Malaysian oil as long as there is no clarity on government policy with Malaysia. They fear taking any risk. However, the edible oils market in India is currently subdued with thin buying despite festive season progressing ahead towards Diwali.

 

  • Trade sources see no parity for imported edible oils at present due to weak demand. Processing units and refiners have thin off-take. For the past 15 days, there has been negligible buying at 20 per cent of what is usually seen around this period. People aren't creating fresh inventory. They are trying to liquidate existing stocks.

 

  • In its monthly vegetable oil import update, the Solvent Extractors’ Association of India (SEA) noted that imports fell by 13 per cent to 13.03 lakh tonnes in September from the same month last year, due to large carry-over stock and imposition of safeguard duty on palm oil originating from Malaysia. Although the import of RBD Palmolein remained more or less the same in September, the quantity of import from Malaysia reduced to 1/3rd from the previous month's import. However the overall import of vegetable oils in November 2018 to September 2019 stood at 14.17 lakh tonnes compared to 13.77 lakh tonnes during the previous comparable period, rising 3 per cent