Agriculture

Palm oil consumption increased 230% in almost 2 decades, yet India imports most of it

India has not been able to achieve self-sufficiency in palm oil production despite 40 years of efforts. Down To Earth travelled to some of the oil growing states to understand why

 
By Shreeshan Venkatesh, Anupam Chakravartty
Last Updated: Wednesday 18 July 2018

Is it a Mirage?

This oil palm plantation, spanning a massive 22,000 hectares (ha) in the Indonesian island of Sulawesi, can be the envy of any official in India trying hard to make the country self-sufficient in edible oil production. India is one of the major growers of oilseeds. Its vegetable oil economy is the fourth-largest after the US, China and Brazil. Yet the country relies on imports to meet over 70 per cent of its vegetable oil requirements; almost 60 per cent of the requirement is met through palm oil. The reason is simple. Palm oil is cheap—it costs 20 per cent less than most vegetable oils—as well as versatile.

Apart from being used as common cooking medium, it is used for making a vast array of food and consumer products, right from vanaspati (hydrogenated vegetable oil), ice creams to lipsticks, soaps and shaving foams. Since 2001, palm oil consumption in the country has increased from 3 million tonnes to nearly 10 million tonnes—that is a growth of over 230 per cent.

The government had anticipated this growth in demand as early as in the 1980s and had set up a committee to identify potential areas for growing the crop. Till then, oil palm, native to West Africa, was grown commercially in Indonesia and Malaysia. By 2012, the government had identified 2 million ha across the country for oil palm cultivation and decided to implement the National Mission on Oilseeds and Oil Palm (NMOOP) under the 12th Five Year Plan (2012-17). Under the mission, farmers were provided training and given subsidised plant materials and input assistance. Private companies were also invited to set up processing factories in oil palm growing areas to facilitate procurement as well as to provide agriculture extension services. Every year, the 12 states under NMOOP set a target of bringing additional area under the crop. Though the Mission received an initial enthusiasm, the targets have been routinely missed (see ‘Targets missed, over and again’,). And in 2017-18, the Union government had to cough up US $6,774 million ( Rs 45,917 crore), the highest ever spent on importing palm oil (see ‘Import continues’).



Why has India not been able to achieve self-sufficiency in the production of this “wonder” oil despite 40 years of efforts? To understand this, Down To Earth (DTE) travelled to some of the oil palm growing states, and found that the crop could be doing more harm than good to Indian farmers and that a mindless chase could land the country in a debacle as Indonesia and Malaysia are facing at present (see ‘Oil’s not well’).

Crop that favours the rich

Rajaram Pichikula, one of the first generation oil palm growers in Andhra Pradesh, vouches for the profitability of oil palm. Every week, the 63-year-old resident of Chinnatadepalli village in West Godavari harvests the ripened fruit bunches, loads them in a cart and heads towards the village collection centre set up by 3F Oil Palm Agrotech Ltd. The bunches are then transported to its mill, 30 km away, the same day and the payment is made directly into his bank account. “On an average I earn Rs 1 lakh per ha in a year,” says Pichikula, who grows the crop on one-fourth of his 12 ha farm. “The only problem I face now is that my trees have grown very tall—up to 12 metres—making harvesting arduous,” he says. Unlike coconut, oil palm bunches are heavy and spiny and are thus harvested with sharp sickles on long poles.

Pichikula plans to fell the existing trees, which have reached the end of their commercial lifespan. He plans to plant hybrid varieties that don’t grow as tall.

B V Subbarao, another farmer from nearby Kommugudem village who grows oil palm on 12 ha, says, “Earlier people in the region used to grow sugarcane, tobacco and paddy. But they are now shifting to oil palm as the returns are consistent and stable.”

But their sentiment is not echoed by other farmers in the region. In May this year, Sriman Narayana of Pothureddypalli village in the neighbouring Krishna district uprooted close to 400 oil palm trees he had planted on his 2.6 ha farm three years ago. “The plants would have started yielding in another two years. But I was not able to bear the expenses involved in their maintenance,” he says. Like other perennial tree crops, oil palm requires regular pruning of fronds, weeding and watering. Though Narayana had hired just one farmhand, he had to shell out Rs 84,000 a year on his payment. “Oil palm is not economical for small landholders and tenant farmers as there is practically no income in the first six years. Besides, it is susceptible to market and seasonal fluctuations,” says Subbarao.

While only palm fruits are traded, harvesting palm requires laborious work of scything and hauling both fruit and leaves that can grow up to 
7 metres long (Photo: Shreeshan Venkatesh)

Vulnerable and volatile

Based on the global palm oil market and the oil content of the crop in a particular oil palm growing zone, the state government decides the rate of fresh fruit bunches every month. But market trends show prices have risen and fallen by up to 50 per cent over the past 15 years (see ‘Uncertain returns’). Agricultural returns are also cyclical in nature. Farmers harvest almost 65 per cent of the annual yield between June and Septe mber and earnings remain low during the lean winter months.

Venkateswar Rao, assistant general manager at 3F Oil Palm Agrotech, says small farmers can easily absorb the shocks by growing other crops in the 9 metre gap between two oil palm trees during the initial four-year gestation period. To facilitate intercropping, NMOOP provides a subsidy of 50 per cent of the cost limited to Rs 5,000 per ha for purchase of seeds, fertilisers, pesticides and tree guards.

But Narayana says intercropping on oil palm plantations is not easy. First, it can be done only during the first two years until the oil palm saplings gain some height. Beyond that, their 1 m-wide-and-3-m-long fronds block the sunlight, affecting the growth of the second crop. “Intercropping can result in lower yields of both the crops as they compete for resources,” says Kalidas Potineni, assistant director at the Indian Institute of Oil Palm Research, Pedavegi, Andhra Pradesh. “One solution is to increase spacing between the oil palm trees, but this might not be economical for the grower,” he adds.

While such proposals can be considered by farmers with large landholdings, any losses are insurmountable to bear for small and marginal farmers who make up about 70 per cent of the country’s farming community. Small wonder, in May this year farmers staged a hunger strike at Godrej oil factory that procures oil palm fruits at Chintampalli in Andhra Pradesh, demanding that the government help them get minimum support price.

Neo problems

To entice small farmers, the government is experimenting with a new concept in Northeast India whose hot and humid climate is conducive for the oil crop. In Assam’s Goalpara and Kamrup districts the state agriculture department in 2015 formed 31 farmer groups to grow the crop collectively. Director of the state agriculture department, M S Manivannan, told DTE that the government has signed a Memorandum of Understanding (MoU) with Hyderabad-based Shivasais Oil Palm Private Limited for setting up an oil processing unit in the region. The mill is likely to start next year and will procure the produce on the lines of milk cooperative. The payment will be directly transferred to the farmers’ bank account.

While the scheme on paper looks promising, farmers are far from being excited. “For the past four years we have been tending to the oil palm trees. They have already started fruiting. We don’t know when they are going to be procured,” says Biraj Sutradhar of the Oil Palm Farmers’ Collective of Piporajhar village. Farmers also have to regularly negotiate with various challenges, from rodents to poor rainfall.

Palm reading

Where it grows and how much oil is produced

Source: Ministry of Agriculture and Farmers Welfare; National Mission on Oilseeds and Oil Palm

In Puroni Hatimura village flanked by Garo Hills, a group of women farmers have painstakingly raised a palm oil plantation on five bigha (0.66 ha) of donated land. “We have spent around Rs 16,000 on raising the plants. This does not include labour and cost of bamboo fencing as it was shared by the village households,” says Bijulee Rabha of Mili Juli Mahila Samiti. “Now rats are eating their roots. We are not sure how long we can withstand the assault,” Rabha adds.

In Goalpara, Kanak Barman and his brother Akon have a 0.66 ha-oil palm plantation next to the Salpara-Borjhar Forest Reserve. “We never leave the farm unattended. Elephants regularly raid fields adjacent to the forest. Though they do not eat oil palm, they get attracted by crops grown alongside oil palm and destroy the plantation,” says Akon. Officials with the agricultural department say they are aware of the human-wildlife conflict in these areas. “It has been occurring for many years. Besides, dealing with such menace is beyond the scope of NMOOP,” an official said.

Low rainfall makes the proposition even more expensive. “Last year, the region received little winter rain,” says Sutradhar. “As local water sources dried up, we had to buy plastic pipes to bring water from a distant stream,” he says, adding that oil palm is a water guzzler when compared with local paddy and legume varieties. To secure water sources, NMOOP provides financial assistance for digging borewells and buying pumps, but most farmers are reluctant to invest as the subsidies come later.

The government, however, seems unperturbed by these grievances. To achieve its target of making the country self-reliant in palm oil production, last year, it removed the land ceiling of 25 ha for government assistance in order to “attract corporate bodies towards oil palm and derive maximum benefit of 100 per cent foreign direct investment,” according to the government’s press release. It further states that waste land, degraded land, cultivable land in the oil palm growing states can be given on lease, rent or bought by private entrepreneurs, cooperative bodies, joint ventures for oil palm plantation. A combination of individual farming, contract farming and captive plantation can boost oil palm cultivation in the country, reads the press release.

The relaxation of rules might increase production, but it raises the risk of going the way of Indonesia and Malaysia, the largest suppliers of palm oil to the world, who have earned the distinction through unsustainable practices and at environmental costs.

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