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NEW DELHI: India experienced an unprecedented surge in vegetable oil imports, setting a record at 167.1 Lakh Tonnes (LT) in November 2022 -October 2023 period. Market analysts attribute this surge, particularly in refined palm oil, to what they view as flawed government policies. Consequently, this surge has adversely affected domestic edible oil production, posing a threat to the sustainability of the oilseeds processing industry, transforming India from a ‘processor’ into a mere ‘packer.’
Notably, over 60% of these imports, totalling 100 LT, comprised palm oil from Indonesia and Malaysia. The influx has caused a slump in domestic market prices, notably impacting mustard oil and dissuading farmers from cultivating more mustard.
Rajasthan, a major mustard seed producer, has responded by reducing the targeted acreage for mustard sowing in the current rabi season from 45.52 Lakh Hectare (LHa) to 41 LHa. Reports on the progress of the Rabi sowing season reveal a shift away from oilseeds towards other crops. Mustard sowing has decreased from 69.31 LHa to 68.66 LHa, contributing to an overall 1.43% reduction in oilseeds acreage. States experiencing declines in oilseeds cultivation include Rajasthan, Gujarat, Haryana, Karnataka, West Bengal, Telangana, Andhra Pradesh, Odisha, and Jharkhand.
The root cause of this scenario lies in the preference for cheaper ‘refined’ palm oil over ‘crude’ palm oil (CPO) in imports, fuelled by the Indian government’s decision to reduce duties and promote the import of refined oil. This marks a departure from the previous policy that encouraged processors to import CPO instead, protecting the domestic processing industry by imposing higher cess on refined oil imports.
In contrast, Malaysia and Indonesia have imposed higher cess on CPO exports, safeguarding their domestic processing industries.