Palm oil is the world’s most widely used vegetable oil with its global production in crop year 2020 exceeding 73 million tonnes (MT). Output is estimated to be 77 MT for the current year. Made from the African oil palm, it is used as cooking oil, and in everything from cosmetics to processed food to cleaning products.
Indonesia and Malaysia together account for almost 90% of the global palm oil production, with Indonesia producing the largest quantity at over 45 million tonnes in 2021. India is the biggest importer of palm oil.
- India is the biggest importer of palm oil which makes up 40% of its vegetable oil consumption. India meets half of its annual need for 8.3 MT of palm oil from Indonesia. Last year, the Centre also unveiled its plan to boost India’s domestic palm oil production.
- Because India is the world’s top consumer of palm oil from Indonesia, the export prohibition might raise food prices. As a result, if the government fails to identify a substitute source of palm oil, edible oil prices in India might rise by as much as 100-200 percent.
- As a result of the Ukraine crisis disrupting sunflower oil imports, cooking oil prices have already reached new highs. Prior to the conflict, almost 75% of worldwide sunflower oil exports came from the Black Sea region.
- Because palm oil and its derivatives are utilised in the manufacturing of a variety of home goods, the ban’s impact might cut into the margins of Indian packaged consumer goods companies.
- Despite the rising prices of the commodity, India’s palm oil imports jumped 21% in March from the previous month as traders moved to secure alternatives to sunflower oil that could no longer be bought from Ukraine.
Impediments in domestic production
- The oil palm is a water-intensive monoculture crop with a long gestation time that is unsuited for small farmers, and land productivity for palm oil is greater than for oilseeds, raising concerns about allocating additional area to oil palm production.
- Palm oil plantations have taken over vast swaths of Southeast Asia’s rainforests.
- Even though it is cultivated in non-forest regions, the palm is an invasive plant that is not a natural forest product of northeastern India, and its influence on biodiversity and soil conditions must be studied.
- Oil palm demands 300 litres of water per tree per day, as well as a high level of pesticide use in regions where it is not a native crop, posing a health risk to consumers.
- The inability of farmers to realise a remunerative price for fresh fruit bunches has been the most crucial challenge in the production of oil palm (FFBs). Oil palm FFBs (Fresh Fruit Bunches) are very perishable and must be treated within 24 hours of collection.
- It might also “wreak havoc on the social fabric” by separating tribal people from their identity related to collective land ownership.
- Oil palm plantations will deplete forest cover and harm endangered species habitat in “biodiversity hotspots and ecologically vulnerable” places.
- Short term
- Palm oil prices increased by roughly 5% over the weekend following Indonesia’s declaration of an export restriction. India has the ability to negotiate with other Latin American and Canadian oil-producing countries.
- India is most likely to rely on Malaysia, the world’s second-largest exporter of palm oil, to fill the void. India might also look at acquiring from Thailand and Africa, both of which produce three million tonnes.
- Long term
- National Mission on Edible Oil-Oil Palm- Because of the favourable meteorological conditions in these areas, the programme will focus on India’s north-eastern states and the Andaman and Nicobar Islands.
- Oil palm growers will get financial help as well as payment based on a pricing and viability criteria under the plan.
How to structure:
- Give an intro about the palm oil ban and the need for palm oil in India
- Explain the impact of the ban on India
- Discuss the biggest issues in increasing the local production
- Suggest way forward