1. Reads
  2. Deep Dives

National Mission on Edible Oils: Why India Still Imports Most of Its Cooking Oil Needs

Aug 25, 2021 6:03 AM 6 min read

The National Mission on Edible Oils-Oil Palm (NMEO-OP) is a go!

Last week, the Union Cabinet allotted ₹11,040cr ($1.48bn) to the long-anticipated project, whose mission is to make India self-sufficient in palm oil by encouraging oilseed production.

You Can’t Spell India Without Oil

The eagerness to make India “Atmanirbhar” in palm oil production is a part of the larger movement to secure self-sufficiency in all edible oils (EOs). These commodities are indispensable in our everyday lives - virtually all Indian cuisines are based on cooking oils. The average Indian consumes 19 kg of these oils per year! To say nothing of EOs’ applications in cosmetics, beauty, poultry and other industries.

The country’s current annual edible oil requirement is 25 million tonnes (MT). Oils like soybean, rapeseed, mustard, groundnut, sunflower, coconut, rice bran etc. Are largely sourced domestically, contributing to 10.5 MT of demand. But the remaining 60% is imported (mainly palm, soya and sunflower). In fact, India is the world's biggest vegetable oil importer.

Now, there’s nothing wrong with importing goods you need. But a 60% dependency seems like an unnecessary Achilles’ heel. Not too different from India’s unhealthy reliance on crude oil imports. But unlike crude, oilseeds can be grown locally. And unlike crude, which can be replaced gradually with renewable energy sources or EVs, cooking oil is irreplaceable and indispensable for the nation-binding tadka.

True, the countries we import EOs from aren’t exactly geopolitical foes. But if labour shortages in Malaysia, drought in Indonesia, extreme weather events in Argentina or price fluctuations in Ukraine can end up adversely affecting the price or quality of the food on our plates in India, the supply chain desperately needs some updating.

Especially now. Over the past year, prices of mustard, soya and palm oil have gone up by c. 30% while sunflower has shot up by more than 40%. Last month, average EO retail prices surged by 52% YoY!

So, why aren’t we Atmanirbhar in EOs already?


India’s Incredible Edible Oils Story

The first thing you need to know is that when GoI officials purr for a future where India is self-sufficient in EOs, they’re actually harkening back to the status quo of a golden era not too long ago.

Before Independence, India was an exporter of these oils. Even after 1947, and well into the 1970s, the country was largely self-sufficient when it came to these commodities.

Things began to change around the mid-1970s. Inflation, drought and food shortages plagued the nation. And the rising popularity of vanaspati (hydrogenated vegetable oil with highly saturated trans fats) made oilseeds a loss-making crop by reducing demand for them, which drove down prices.

For years, oilseed production stagnated at around 10 MT even as the population exploded. By 1977, the import gates were thrown wide open for EOs.

But that same year, the then finance minister HM Patel called upon Dr. Verghese Kurien (aka the Father of the White Revolution) to devise an Amul-like cooperative network for EO farmers to boost productivity and stabilise prices.

The result was the brand Dhara, an inspiring Atmanirbhar success story. It worked under the aegis of the National Dairy Development Board (NDDB) and the Gujarat Cooperative Milk Marketing Federation by tapping into the existing Amul distribution network. By 1991-92, Dhara cornered a stunning 50% (pdf) share of the organised market.

National Mission on Edible Oils: Why India Still Imports Most of Its Cooking Oil Needs

Around the same time, in 1986, GoI launched the Technology Mission on Oilseeds (TMO). Its mission was to increase the area of land under oilseed cultivation and boost domestic oilseed production (both of which had stagnated to levels around 16 million hectares and 10 MT respectively). The Mission did a commendable job: By 1991, these numbers had jumped to 25 million hectares and 18 MT. (TMO has increased production to 32 MT as of 2018-19.)

So far, so good. It was after 1994 that things began going downhill. As per the WTO agreement, edible oil was put under the Open General License (OGL) with a 65% duty. The share of imported oils in the market naturally began to rise steadily.

1998 was a particularly bad year for the EO industry. At the time, India was already importing 30% of its oilseed needs. Import duties were further reduced to merely 15%. But the last straw was when dropsy struck Delhi. 60 people died and around 3,000 fell sick. The blame fell on mustard oil laced with argemone. NDDB even ended up releasing ads informing consumers to not buy its Dhara mustard oil.

Almost overnight, public faith in domestic brands plummeted. Foreign, imported brands capitalised on their loss (and fuelled conspiracy theories about alleged sabotage to destroy the local EO industry). Meanwhile, the sale of loose oils was banned - and packaging requirements increased costs, pushing out small manufacturers. This was bad news for an industry so far dominated by small-scale players.


Big Business for Big Business

Post-1994, the EO market was up for grabs. Enter, the so-called “ABCD quartet” (the Big Four of the global agricultural commodity industry - Archer Daniel Midlands, Bunge, Cargill and Louis Dreyfus). They signed lucrative JVs and announced partnerships with up-and-coming Indian companies.

FYI: One such company was the Adani Group, which in 1999 inked a 50-50 JV with Wilmar International to launch Fortune Oil. Adani Wilmar today accounts for a third of all imported EO in India.


How to Get Away with Cuisine Adulteration

Until the 1970s, Indians’ edible oil preferences were things we had inherited over centuries of history. They were very much a mainstay of Indian culture. A combination of personal taste, climatic conditions and cropping patterns had led to mustard (North and East India), coconut (South), groundnut (West) and sesame oil (Rajasthan) being the dominant EO varieties in those regions. In fact, in 1974, mustard, groundnut and cottonseed oils together commanded a 96% market share.

National Mission on Edible Oils: Why India Still Imports Most of Its Cooking Oil Needs

Today, though, due to shifting lifestyle preferences, entry of international players and the developments of the past three decades (especially the dropsy fallout), the tables have turned. Palm oil now rules the roost, with soybean following at #2.


Time to Take the Bull By Its Horns

Why has India struggled to scale up its oilseed prowess? Major reasons include the crop’s reliance on timely rains, high cost of seeds, small holdings by farmers with limited resources, and low productivity (for example, soybean yields in Brazil are 3x those in India). The main factor, though, has been farmers’ reluctance to shift to oilseeds when there is so much demand for rice and wheat (whose prices are also set handsomely by GoI).

What is GoI planning to do about this? Let’s look at the focus areas of NMEO-OP. Firstly, it will give palm oil farmers an annually-determined price assurance to protect them from international price volatilities. Growers in the North-East and Andaman would also have 2% of palm prices borne by GoI. It is also proposed to increase interventions such as more monetary assistance for planting material, inter-cropping assistance, aid for rejuvenating old fields, and capital assistance to industries. The NMEO scheme itself has been proposed until 2024-25.


Parting Thoughts

The country’s tryst with edible oil has been an eventful one. It has been influenced by climate, war, Government policies, suspected sabotage, inflation, and international trade policy. The road to self-sufficiency can only be charted by smart Government intervention and robust participation by both small-scale farmers and private-sector companies.

Given that the country spends about $8.5-10bn annually on imported vegetable oils, whose prices are extremely unpredictable and demand for which will always remain sky-high, reducing the EO import dependency will only bode well for the strained exchequer.



The cut-throat world of Business and Finance means that there is fresh News everyday. But don't worry, we got you. Subscribe to TRANSFIN. E-O-D and get commentaries like the one above straight to your inbox.