Higher MSP, dearer imports expected to keep rates firm for local oilseeds
India looks set for a bumper mustard harvest this rabi season, which raises the question: Will those growing the oilseed reap enough compensation for their effort? Increased supply generally suppresses prices, but experts are optimistic that mustard farmers will duck that trend this time.
The country has already achieved its mustard acreage for 2025-26 this rabi season, according to the Union Ministry of Agriculture and Farmers Welfare. The farmers are likely to fetch better prices this year despite record produce because of sustained demand and a substantial hike in minimum support price (MSP) for the crop.
Mustard has been sown on a record 9.1 million hectares (ha) for rabi season 2022-23, latest ministry data showed. This is a growth of 24.49 per cent from 2021-22, when the acreage was 7.3 million ha.
This surpassed the government’s own set projection of 9 million ha of mustard by 2025-26.
The overall acreage of oilseeds has increased by 22.09 per cent compared to the corresponding period last year, in which mustard has a major share.
The Centre has been trying to promote oilseeds production in the country. Before the beginning of this Rabi season, it announced a sharp MSP hike for mustard — the highest among all crops.
Mustard farmers this season will get Rs 5,050 per quintal, compared to Rs 4,650 per quintal last year. Even last year, farmers sold their produce at prices above MSP.
Shweta Saini, senior fellow with Indian Council for Research on International Economic Relations who researches Indian agricultural policies, said:
Usually the price of a bumper crop falls but that seems unlikely with mustard this season. It can provide the substitution effect to some extent for palm oil, which has become exceptionally expensive as well as soybean, which is also expensive and the production is low this year.
Around 60 per cent of the domestic demand for edible is met through imports, of which palm oil accounts for the highest (55.4 per cent).
Globally, there was a sharp increase in edible oil prices in 2021 and they are likely to remain high this year.
India’s import bill during the first nine months of the current fiscal (April-December 2021) surged by 75 per cent to Rs 1.04 lakh crore from Rs 59,543 crore during the corresponding period last year. And that is also one of the reasons the government has been encouraging more domestic oilseeds production.
Buoyant demand
Global inflationary pressure on edible oils will continue, Saini said.
Mustard is also likely to replace soybean in the poultry industry, as the production of the latter is affected. Around half the feed requirements in the sector are met by mustard, soybean or cotton.
The Union government's decision last year to ban blending of mustard oil with any other cooking oil will also boost the demand for mustard, said Devinder Sharma, food and agriculture policy analyst. “Additional mustard oil will be required to replace the oils which were being used for blending earlier.”
In a recent statement, the Central Organisation for Oil Industry and Trade (COOIT) had urged the government to create a buffer stock of mustard seeds of at least 2.5 million tonnes. This suggestion was aimed at ensuring oil processing units operate throughout the season.
“If the government creates a buffer stock of 2.5 million tonnes of mustard, it will further encourage mustard cultivation and also act as a price stabilisation mechanism in case of sharp fluctuations in mustard prices as it was witnessed during 2021,” COOIT chairperson Suresh Nagpal said.
Meanwhile, while area under mustard is continuously increasing — by an average of 5 million ha between 2014-15 and 2018-19 — the harvest targets are way off. The average production was 7.7 million tonnes during the same period and the government has set a target of 17 million tonnes by 2025-26. In 2020-21, production was 10.1 million tonnes.
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