|
|
|
You can get e-magazine links on WhatsApp. Click here
|
|
|
|
|
|
Consumption of edible oil in India - A paradigm shift
|
|
Tuesday, 01 October, 2013, 08 : 00 AM [IST]
|
|
Raju Choksi
|
|
fiogf49gjkf0d There has been paradigm shift in country’s edible oil consumption since last few years and this is impacting the oilseeds cropping pattern, imports, exports and inter-state trade. Apart from consumption pattern, the production is also impacted by change in weather (including monsoon rains), production cost, minimum support price declared by government every year and global demand & supply scenario. It is necessary to discuss each point separately to understand how edible oil scene is changing in the country.
Demand / Consumption
India’s consumption of edible oil has risen to around 17.5 million metric ton (mmt) in 2012-13 from 11.6 mmt in 2003-04, compounded annual growth rate (CAGR) of 4.6% during the period under consideration, according to data available from the Solvent Extractors Association of India (SEA). With growing population, India’s demand for edible oil has been rising consistently with CAGR of 2.7% in the last three years and around 5.5% in the last five years. Apart from population growth, another significant factor that is impacting edible oil demand is the increase in disposable income amongst the growing middle class. This has led to change in the lifestyle, which has increased the consumption of edible oils.
The growth in consumption may have slowed in the last couple of years due to slowing economy, but it is not likely that the consumption may stabilise at any level. Even with current 3-year CAGR of 2.7%, the consumption is likely to cross 21 mmt by 2019-20. With economic growth expected to improve, the demand may be even more than current CAGR. A modest CAGR expectation of 4% by SEA shows that the demand is likely to touch 23 mmt by 2019-20.
Consumption Pattern
The major edible oilseeds that India cultivates are groundnut, mustard or rapeseed, nigerseed, safflower, sesameseed, soybean and sunflower. Apart from this, the country also consumes edible oils like cottonseed oil, coconut oil and rice bran oil, which comes from processing of cotton, copra and rice bran respectively. Palm is another oil that is consumed, but it is not cultivated in the country, rather it is imported. Out of these edible oils, major consumption is of palm, soya and mustard.
Four western India states of Gujarat, Rajasthan, Maharashtra and Madhya Pradesh, consume one- third of total edible oil consumption in the country. As far as preference for edible oil is concerned, there has been marked switch from groundnut oil to cottonseed oil, soybean oil and sunflower oil in these four states. This change could be attributed to reasons like production cost, availability and other options available to growers which would increase their income.
In case of groundnut, despite CAGR of close to 21% in minimum support price in last three years, the production has been falling due to erratic monsoon and higher production cost compared to options of cotton and soya available to growers. The production of groundnut has been falling by average 8% since last five years leading to rise in oil prices. The demand for groundnut for direct human consumption has increased immensely. This has led to less groundnut being available for the oil crushing industry, leading to diminishing supply of groundnut oil.
The growth in consumption is also because of availability of palm oil through imports. Palm oil, being cheapest of all, is widely used for commercial purpose and by class of people who cannot afford higher priced groundnut, cotton, soy or mustard oils. Apart from soy and palm, the consumption of cottonseed is also on the rise as the crop offers higher returns in domestic as well as international markets due to huge demand from countries like China.
Production
Despite various incentives offered by government there has not been adequate growth in oilseeds production. In fact, according to figures available from SEA, the production of oilseeds has grown marginally by close to 2% from 2003-04 to 2012-13.
As far as production of edible oils from oilseeds is concerned it has shown a negative growth of 0.6% during the nine-year period from 2003-04 to 2012-13 as against CAGR of 4.6% in demand / consumption of edible oils. This has led to an increasing dependence on imports to make up for the shortfall between demand and supply.
One of the major factors that have contributed to fall in production of oil is shift from crop with higher oil recovery to crop with lower oil recovery. Crops like groundnut and sunflower has oil recovery ratio of 40% and 30% respectively; while cottonseed and soybean has oil recovery ratio of 11.5% and 17% only.
Surprisingly, government’s measure to raise minimum support price (MSP) in last few years have also not yielded desired results. MSP of various oilseeds have risen by 11-21% compounded annually over the last three years. This growth has been in the range of 7-19% if five-year period is considered from 2007-08 to 2012-13.
Within edible oil basket, the production has shifted from groundnut and sunflower to soybean and mustard. Not surprisingly, demand is the major factor which is causing this shift in production pattern. Apart from the demand, other factors like production cost and weather uncertainty have also played their part.
Imports
India is the top importer of edible oil as its demand far exceeds availability from domestic sources. The gap between demand and production of oil is widening and this will continue in the foreseeable future. During oil year 2012 -2013, about 60% of India’s edible oil consumption will be met by imports. Amongst major edible oils imported, share of palm oil is about 75% because of its abundant and relatively cheaper supply from nearby origins like Malaysia and Indonesia. Edible oil imports have grown by around CAGR of 7% during last three years and by 16% in last five years.
From November 2012 to July 2013 in the current oil marketing year, edible oil imports have risen by 10% to 7.8 million tonne from 7.1 million tonne in the corresponding period of last year.
The import basket has also seen changes in the last few years. While the share of refined oil has increased; the share of crude oil is falling; though it still remains at 77%. Similarly, the palm oil imports share has risen; while that of soft oil has fallen. Reduction in duty difference between crude and refined palmolein and inverted duty structure by palm oil exporting countries has led to higher imports of refined oil in India; thereby increasing share of refined oil as compared to crude oil, the SEA said in a recent statement.
Conclusion
Government of India needs to carry out major reforms in oilseed cultivation to spur the stagnating growth. This is required for ensuring that the country has self sufficiency in the edible oil segment as the consumption of edible oils will continue to grow. As population grows and as lifestyle improves on the back of improving economy; the consumption is likely to grow at healthy pace and the country has to take measures to build its own production for sustaining self sufficiency. Also, over dependence on imports may prove detrimental to overall economic growth.
One of the measures that can be fruitful in reducing imports and achieving self sufficiency is promoting palm oil cultivation. Currently, palm oil cultivation is negligible. Though palm oil is presently being cultivated in parts of Kerala and Tamil Nadu, the acreage is still very low to meet palm oil demand in the country.
Another measure which can be considered is to pay special incentives to farmers to switch from grain cultivation to oilseed cultivation. India, on one hand, has excess of grains, which have to be exported at cheap rates for want of proper storage facilities, and on the other, imports edible oils which are in short supply in the domestic market.
(The writer is VP [agri-commodities], Anil Nutrients Ltd)
|
|
|
|
|
|
|
|
|
|