India’s love for cooking oil to keep doors open for imports for years

By Pratik Parija

Indians will probably buy expensive cooking oils from overseas for at least another 15 years, as demand continues to far outpace domestic production.

Consumption is expected to climb in India by as much as 17 per cent over the next four years, according to B V Mehta, executive director of the Solvent Extractors’ Association. A rise that steep would further widen the manufacturing gap: India will likely produce about 10 million tons of edible oils in 2021-22, compared with local consumption of as much as 23 million tons.

India, one of the world’s largest buyers of vegetable oils, has struggled to wean itself off imports. Farmers have typically focused on growing cotton and staples like rice, wheat and sugar, partly because the government sets price floors for these crops and buys some of them -- such as food grains -- in bulk for its welfare programs.

Also Read --- Government slashes import duty on refined palm oil to 12.5% to cool retail prices

A shift in mindset is not likely overnight. High-yielding rapeseed and sunflower varieties and remunerative prices could boost the nation’s output. But incentives for India’s farmers to grow oilseeds are still weak, according to Siraj Chaudhry, managing director and chief executive officer of National Commodities Management Services Ltd, a warehousing and trading company.

Change has to start locally, he said, with a close watch on the crop cycle. Rice farmers should be encouraged to grow sunflower during India’s rainy months, for instance, and wheat producers to cultivate rapeseed in the winter. Higher production of rice bran oil and expensive peanuts could also serve as supplements, he said.

Palm oil, in particular, has potential to close the production gap. Indians often prefer it over soft oils because it’s cheaper and can be blended easily with other fats. It also lasts longer than other choices, making it cost-efficient for bulk users such as restaurants and hotels.

Moving part of the supply chain locally may help. Commodities experts have lobbied the Indian government to import soybeans and crush them domestically, rather than simply purchase soybean oil. That would potentially boost soy oil supplies at home and meet rising demand for feed from the poultry industry.

“It has to be a combination of factors, including providing new technology to boost productivity,” Chaudhry said.

The problem of cost

Cooking oils are an integral part of the Indian diet. They play a starring role in feasts served during the country’s massive festivals. They’re used to fry jalebis, the sticky, road-side sweet, and for practically every other staple dish. Their ubiquity has made India the world’s biggest importer of palm, soybean and sunflower oil.

Increasing domestic palm oil production would augment the overall supply of vegetable oil in the country, according to Mehta. India aims to produce 1 million tons by 2026 and further boost output to 2.8 million tons by 2030, up from 300,000 tons, he said.

But price control is increasingly a wrinkle. India’s attempts to ease inflation by cutting duties on edible oil imports and imposing limits on inventories have so far failed to lower costs. Most of the commodities are linked to global prices that have rallied in the past year due to a supply crunch and rising biofuel use.

India’s consumer food prices rose in December at their fastest pace in six months amid soaring costs for vegetable oils, which jumped more than 24 per cent from a year earlier, according to the statistics ministry. The increase comes despite a reduction in edible oil import taxes, which have further boosted world prices on expectations of higher purchases from India.

Food costs are rising around the globe. Crops that can be converted into fuel have been hit particularly hard due to surging crude oil costs. In Kuala Lumpur, the price of palm oil, the most consumed vegetable oil, was up more than 30 per cent in 2021. Soybean oil in Chicago saw a similar surge during the same period.

Meanwhile, in New Delhi, vegetable oils -- such as those extracted from rapeseed, sunflower, soybean and palm -- rose between 12 per cent to more than 30 per cent in 2021, according to the food ministry.

Palm oil extended gains to a fresh record on Monday. Benchmark futures in Kuala Lumpur rose as much as 1.1 per cent to 5,380 ringgit ($1,286) a ton, the highest ever for the most-active, rolling contract. Rival soybean oil in Chicago gained for a sixth day to 63.08 cents per pound.

“It will probably be better off if the country can meet 60 per cent to 70 per cent of its demand from domestic output and the rest from imports, reversing the current trend,” Chaudhry said.

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