Why oilseeds production in India has remained stagnant
Even while the import-dependent edible oils market in India has been affected by geopolitical factors, the domestic production of oilseeds remains below the global average.
The compounded annual growth rate (CAGR) of oilseeds production in India has remained at 1.94 per cent between 2011-12 and 2020-21, as against global production, which witnessed a CAGR of 2.9 per cent in the same period.
The area under cultivation remaining stagnant, marginal improvement in crop yield, low seed replacement rate, low level of mechanisation of farm activities, and competition from other commercial crops, coupled with price volatility, are the main reasons for the stagnant output.
In its report titled ‘Edible oil: India’s bid to reduce imports and become Aatmanirbhar’, CareEdge — a knowledge-based analytical group that provides insights based on technology, data analytics and detailed research methods -– attributes the muted growth in domestic production to a restrained increase in the area under cultivation, coupled with a marginal improvement in crop yield over the past 10 years.
Rise in cultivation area
While the area under cultivation increased from 26.3 lakh hectares in 2011-12 to 28.8 lakh hectare in 2020-21, the yield per hectare improved marginally from 1,193 kg per hectare to 1,254 kg per hectare during this period. Consequently, total production increased from 29.8 million tonnes (mt) in 2011-12 to 36.1 mt in 2020-21, at a CAGR of 1.94 per cent.
On the other hand, global oilseeds production increased from 447 mt in 2011-12 to 607 mt in 2020-21, a CAGR of 2.9 per cent, which is almost 1.5 timesIndia’s growth.
On the seed replacement rate (SRR), the report said only around 15 per cent of India’s total cropped area is sown with freshly obtained quality seeds every year, while the rest is sown with farm-saved seeds.
(SRR is defined as the percentage of area sown out of the total cropped area in the season by using certified/quality seeds other than the farm-saved seeds. The SRR is directly related to productivity, as certified seeds are better in productivity.)
However, this ratio varies from crop to crop. For oilseeds, it varies between 20 per cent and 80 per cent. Therefore, the achievement of optimal SRR is imperative for better yields, it said.
Stressing on the need for mechanisation of farm activities, it said said subdued growth of production (effectively low yield per hectare) can also be attributed to the low level of farm mechanisation.
Although the farm mechanisation rate in India has increased in the recent past, it is still far behind other countries such as China.
Other factors for stagnant production are the competition from other commercial crops, coupled with price volatility. Some crops such as oil palm have a long gestation period and, therefore, restrict income flow for a minimum of four-five years. This, coupled with fluctuation in the price of crude palm oil in the international market and competition from other economically viable crops such as rubber, areca nut, sugarcane, banana and coconut, have , contributed to low/ stagnant acreage.
The report attributed the increase in domestic edible oil consumption to an increase in population, urbanisation; and i per capita consumption .
Citing estimates from the United Nations’ Population Division, it said India’s total population is expected to increase from 1.22 billion in 2011 to 1.55 billion by the Census 2031. The urban population ratio is also expected to increase from the present level of 31 per cent to 40 per cent by 2033-34. As urbanisation increases, dietary habits and traditional meal patterns are expected to shift towards processed foods that have a high vegetable oil content, it said.
Although the per capita consumption of edible oil in India is low when compared to the global average, it is increasing at a CAGR of around 5 per cent from 16.20 kg per annum in 2013-14 to 19.50 kg per annum in 2017-18.
It said the increase in income has contributed to a rise in the per capita consumption of edible oil, as the expenditure elasticity for vegetable oils is positive.
India’s per capita income (at constant price) has increased at a CAGR of around 4.5 per cent per annum from ₹63,462 in 2011-12 to ₹94,270 in 2019-20. However, it declined to ₹85,110 in 2020-21 due to the Covid-induced lockdown and consequent disruption in business activities.
Apart from positive expenditure elasticity, an increase in urbanisation, change in behaviour and increasing acceptance of packaged foods can also lead to an increase in the per capita consumption of edible oil in the near-to-medium term, it said.
“It is desirable to increase domestic oilseeds production to reduce import dependency in an uncertain geo-political environment amid the increasing de-globalisation trend across the world, as huge reliance on imports could compromise the national interest in the long run. Therefore, it has become imperative for a country like India to become not only self-reliant but also self-sufficient to the extent possible, which is economically prudent, as well as strategically sensible,” the report said.
July 12, 2022