Market Survey CMYK BY: DR I. SATYA SUNDARAM EDIBLE OILS: PRODUCTIVITY HOLDS THE KEY India definitely has a favourable climate for growing a variety of oilseeds. However, its yields are about half of the world average, making it one of the leading importers of edible oils to cater to its vast thriving domestic market. T he edible oil economy of India is beset by a number of problems that have hindered its ability to meet rising demand, as apparent from poor yields and declining production. The pro- ductivity of oilseeds is just 900 kg per hectare, putting India's oilseeds yields among the world's lowest at about half of the world average. The total area under oilseeds production in the country is around 26 million hectares and less than 25 per cent of the oilseeds area is irrigated. While the demand projections of the coun- try by 2010 have been estimated around 15.6 million tonnes of edible oils, stagnating domestic oilseeds production have ensured that India will remain an important global im- porter of edible oils in the foresee- able future. Current scenario Currently, India accounts for 7.4 per cent of world oilseeds output, 6.1 per cent of world oil meal pro- duction, 3.9 per cent of world oil meal exports; 5.8 per cent of world veg oil production; 11.2 per cent of world veg oil imports and 9.3 per cent of the world edible oil con- sumption. Rapeseed oil (1.9 million tonnes), groundnut oil (0.9 million tonnes), and soybean oil (0.9 million tonnes) are the major edible oils produced in the country. The country also pro- duces cottonseed oil, sunflower seed oil, rice bran oil, coconut oil, sesame oil and castor oil. A growing population with var- ied dietary habits and steady eco- nomic growth have led to rising standards of living, pushing con- sumption and as a corollary there is a thriving domestic market for edible oils. But oilseeds production has remained stagnant at around 25 million tonnes which amounts to eight million tonnes of edible oils. Edible oils consumption increased from around six million tonnes in the early 1990s to around 11 mil- lion tonnes in recent years. The
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Market Survey
CMYK
BY: DR I. SATYA SUNDARAM
EDIBLE OILS: PRODUCTIVITYHOLDS THE KEY
India definitely has a favourable climate for growing a variety
of oilseeds. However, its yields are about half of the world
average, making it one of the leading importers of edible oils
to cater to its vast thriving domestic market.
The edible oil economy of
India is beset by a
number of problems
that have hindered its
ability to meet rising
demand, as apparent from poor yields
and declining production. The pro-
ductivity of oilseeds is just 900 kg
per hectare, putting India's oilseeds
yields among the world's lowest at
about half of the world average. The
total area under oilseeds production
in the country is around 26 million
hectares and less than 25 per cent of
the oilseeds area is irrigated. While
the demand projections of the coun-
try by 2010 have been estimated
around 15.6 million tonnes of edible
oils, stagnating domestic oilseeds
production have ensured that India
will remain an important global im-
porter of edible oils in the foresee-
able future.
Current scenario
Currently, India accounts for 7.4
per cent of world oilseeds output,
6.1 per cent of world oil meal pro-
duction, 3.9 per cent of world oil
meal exports; 5.8 per cent of world
veg oil production; 11.2 per cent of
world veg oil imports and 9.3 per
cent of the world edible oil con-
sumption.
Rapeseed oil (1.9 million tonnes),
groundnut oil (0.9 million tonnes),
and soybean oil (0.9 million tonnes)
are the major edible oils produced in
the country. The country also pro-
duces cottonseed oil, sunflower seed
oil, rice bran oil, coconut oil, sesame
oil and castor oil.
A growing population with var-
ied dietary habits and steady eco-
nomic growth have led to rising
standards of living, pushing con-
sumption and as a corollary there
is a thriving domestic market for
edible oils. But oilseeds production
has remained stagnant at around
25 million tonnes which amounts
to eight million tonnes of edible oils.
Edible oils consumption increased
from around six million tonnes in
the early 1990s to around 11 mil-
lion tonnes in recent years. The
Market Survey
CMYK
strong demand coupled with our in-
ability to meet it, has ensured In-
dia’s dependence on import to ca-
ter to the domestic consumption,
which is over 40 per cent, making
it a leading importer of edible oils
in the world.
Total edible oil consumption in
the country was expected to increase
by two per cent to 12.5 million tonnes
in 2006-07 compared with 12.3 mil-
lion tonnes in the previous year. The
per capita consumption, however, is
likely to remain unchanged at 11.16
kg.
India has the potential to pro-
duce over 12 lakh tonnes of rice bran
oil per year. The current production
is around seven lakh tonnes out of
which refined rice bran oil is just 1.5
to 2.0 lakh tonnes.
There are about 15,000 oil mills,
over 700 solvent extraction plants,
625 refineries and nearly 250
vanaspati (hydrogenated oil) units
spread across the country. They con-
tribute to the supply pool of around
12 million tonnes of various oils and
about 20 million tonnes of various
oil cakes/extractions that are used
as animal feed.
According to the fourth advance
estimates released by the agriculture
ministry in July 2007, oilseeds out-
put in 2006-07 may be at around
23.88 million tonnes, down 14.65 per
cent from final production estimates
of 27.98 million tonnes in 2005-06.
The world oilseeds production
stood at 387 million tonnes in 2005-
06, and 371 million tonnes in 2004-
05. Similarly, world vegetable oils
production was 113.7 million tonnes
in 2005 against a forecast of 113.7
million tonnes in 2010.
Edible oils imports
Edible oils imports declined by
14 per cent in 2005-06 (November
to October) to 4.42 million tonnes
from 5.0 million in 2004-05. It is
attributed to a high level of oilseeds
output at 27.7 million tonnes in
2005-06.
In the total imports basket for
2005-06, imports of refined oil were
reduced to 0.13 million tonnes from
0.45 million tonnes in 2004-05. With
the government raising the cap on
carotenoid content at 500 particle
per milligram (ppm) on crude
palmolein, importers refrained from
buying it from international mar-
kets. As a result, its imports in 2005-
06 were reduced to just 55,804 tonnes
from the 2004-05 level of 1,86,000
tonnes.
Total imports of pal-based oils
were reduced to 0.25 million tonnes
in 2005-06 from 0.30 million tonnes
in 2004-05. Of course, crude palm oil
imports maintained at around 0.23
million tonnes in 2005-06.
Importers purchased 0.1 million
tonnes of crude sunflower oil in 2005-
06 out of the tariff related quota of
0.15 million tonnes for which they
had to pay 45 per cent import duty
against the normal duty of 78.2 per
cent. In 2005-06, the country im-
ported 0.17 million tonnes of crude
soy oil as against 0.2 million tonnes
in 2004-05.
Vanaspati imports into the coun-
try were placed at 0.3 million tonnes
in 2005-06, up from 0.2 million
tonnes in 2004-05. With this, the
overall imports of vegetable oils into
the country dipped by 0.22 million
tonnes in 2005-06.
In 2005-06, oil year (November
to October), the country imported
2.4 million tonnes of crude palm oil
(CPO). In November-March 2006-07,
about one million tonnes of CPO
were imported.
Given the decline in oilseed pro-
duction, edible oil imports in 2006-
07 (November-October) may touch a
level of about 55 lakh tonnes. The
year witnessed a shortfall in edible
oil supply from domestic sources to
the tune of 8 lakh tonnes.
The import bill on account of ed-
ible oil is estimated to touch Rs
180,000 million in 2006-07 against
Rs 150,000 million in the previous
year, and Rs 100,000 million the year
before that.
In the first nine months of the oil
year, November 2006 to July 2007,
India’s imports increased eight per
cent to about 33 lakh tonnes, against
30.5 lakh tonnes in the correspond-
ing period of the previous year. Im-
ports increased anticipating higher
demand.
Price trends
At the international level, palm
oil price may rise as high as $1000
a tonne in 2008 because of increas-
ing demand and a shortfall in sup-
plies of vegetable oils. Vegetable oils
are increasingly being used to make
biodiesel as crude oil prices more
Table I
Domestic Production of Various Edible Oils(in thousand tonnes)