Palm oil farming is a transformative economic force for India

By Dr Anupam Barik

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New Delhi: India is at a critical point on its journey towards agricultural self-reliance. As the world’s largest importer of palm oil, the country faces a dual challenge: balancing the affordability of edible oils for consumers while reducing its heavy reliance on imports, which imposes a significant economic burden.

The government’s initiatives, led by the National Mission on Edible Oils – Oil Palm (NMEO-OP) and National Mission on Edible Oils – Oilseeds (NMEO-Oilseeds), aim to boost domestic oilseed production, empower rural communities, and promote sustainable growth, ultimately advancing the vision of Atmanirbhar Bharat in edible oils.

On October 3, 2024, the Union Cabinet approved the NMEO-Oilseeds, which will be implemented from 2024-25 to 2030-31 with a financial outlay of ₹10,103 crore. The programme will focus on enhancing the production of key primary oilseed crops such as rapeseed-mustard, groundnut, soybean, sunflower, and sesame, along with improving extraction efficiency from secondary sources like cottonseed, rice bran, and tree-borne oils.

It targets an increase in primary oilseed production from 39 million tonnes (2022-23) to 69.7 million tonnes by 2030-31. Together with NMEO-OP (Oil Palm), the target is to boost domestic edible oil production to 25.45 million tonnes by 2030-31, meeting around 72% of India’s projected domestic requirement of 35.5 million tonnes.

Palm Oil’s Role in India’s Economic Framework

In 2024, palm oil accounted for 38% of India’s edible oil consumption, making it an integral part of millions of people’s daily diets. However, this dependence on imports creates vulnerabilities. Currently, 57% of the country’s edible oil demand is met through imports, with palm oil alone constituting 59% of this total.

This reliance costs India approximately $15 billion annually, straining the economy and exposing it to global price fluctuations. Cooking oil prices, for instance, surged by 65% over the past year due to higher import duties and market volatility.

To address these challenges, the NMEO-OP aims to transform domestic production. The mission plans to increase oil palm cultivation by 16.71 lakh hectares, with 8.50 lakh hectares expected to produce fruit by 2029-30. This is projected to yield 170 lakh tonnes of Fresh Fruit Bunches (FFBs) and boost Crude Palm Oil (CPO) production to 28.11 lakh tonnes by 2029-30.

Boosting Production, a Game-Changer for Farmers

India’s palm oil strategy is unique compared to global giants as it focuses on small-scale farmers rather than large plantations. This model holds immense potential for rural job creation and income generation. For instance, the Mega Oil Palm Plantation Drive engaged over 10,000 farmers across 12,000 hectares in 15 states from July to September 2024. With reliable yields of 4–5 tonnes per hectare annually, palm oil cultivation promises economic stability for participating farmers.

However, a key challenge is the four-year gestation period before oil palms begin delivering consistent returns. To address this, the NMEO-OP provides subsidies for saplings, fertilizers, and irrigation, along with a Viability Gap Payment (VGP) mechanism to support farmers during price dips. Promoting intercropping—growing secondary crops alongside oil palms—offers farmers interim income and improves soil health.

To ensure success, the Solvent Extractors Association of India (SEA) has recommended increasing the NMEO-OP budget from ₹10,000 crore to ₹25,000 crore over the next five years. This enhanced funding would strengthen farmer education, improve seed quality, modernize agricultural practices, and develop processing and storage infrastructure.

Strengthening the Value Chain

Palm oil’s economic impact extends beyond farming to a broader value chain, encompassing transportation, warehousing, and processing industries. However, the availability of discounted refined palm oil imports slows this progress. To counter this, the SEA has proposed raising import duties on refined palm oil (RBD Palmolein) from 12.5% to 15% and restricting duty-free imports of finished products such as soap noodles and stearic acid that undermine local industries.

In a recent development, Hindustan Unilever Limited (HUL) announced the acquisition of the palm undertaking of Vishwatej Oil Industries in Telangana as part of its palm localization strategy. HUL plans to set up sapling nurseries, fruit collection centers, and a state-of-the-art palm oil mill, while introducing global best practices in sustainable agriculture. This initiative aligns with India’s NMEO-OP and aims to strengthen local supply chains.

Additionally, SEA advocates for uniform import duties on all crude edible oils to level the playing field for domestic producers. It has also called for government-backed private partnerships in oilseed extension programs and the establishment of model farms to encourage best practices and innovation.

Consumer Preferences and Sustainability

India’s approach to palm oil farming is uniquely aligned with consumer preferences and sustainability goals. For the first time, the Union Agriculture Ministry is conducting a nationwide survey on edible oil consumption patterns through the “My Gov” platform.

This data-driven initiative seeks to capture consumer preferences and edible oil consumption trends. The insights gained will guide policy decisions and enable farmers to cultivate demand-driven crops, effectively bridging the gap between consumer needs and agricultural production.

Globally, palm oil supplies between 35% and 40% of the world’s vegetable oil demand on just under 6% of the land used to produce all vegetable oils. To get the same amount from alternative oils like soybean, coconut, or sunflower oil you would need anything between 4-and-10 times more land, which would just shift the problem to other parts of the world and threaten other habitats, species and communities.

Because of its high yield, palm oil requires around one-ninth the land of substitutes like rapeseed, olive and soybean. To keep pace with growing food demand would require 36 million hectares of additional Oil Palm land, whereas soybean, the second most popular oil crop, would need 204 million more hectares. On top of this, producing palm oil takes significantly less amount of fertilizer, pesticides and energy inputs.

Environmental sustainability forms a key pillar of India’s palm oil strategy. Under the NMEO-OP, the focus is on achieving environmental benefits such as low water usage, enhanced soil health, and the productive use of fallow crop areas. Regions like the Northeast, with their favorable climatic conditions, are well-suited for large-scale cultivation. However, challenges such as inadequate infrastructure and high transportation costs must be addressed through targeted investments and subsidies, says SEA.

Long-term sustainability also requires investments in research and development. Innovations like climate-resilient seedlings, high-density planting techniques, and public-private partnerships can improve productivity, according to the SEA. Furthermore, practices such as soil conservation and biodiversity preservation are essential to maintaining ecological balance.

A Roadmap for Transformation

India’s palm oil journey represents more than just an agricultural mission—it is a blueprint for inclusive growth, economic resilience, and environmental sustainability. By placing farmers at the center of its strategy, prioritizing sustainability, and fostering collaboration between the government and industry, India can achieve self-reliance in edible oils.

This transformation promises to strengthen the economy, empower rural communities, and create thousands of jobs across the value chain.

With the right policies, investments, and partnerships, palm oil farming has the potential to revolutionize India’s agricultural and economic landscape—driving prosperity from farm to table.

About the Author:  Dr Anupam Barik is the former Additional Commissioner (Oilseeds), Department of Agriculture & Farmers (DA&F), Government of India (GoI).