India’s edible oil import doubles as demand rises

The falling production of oilseeds, has more than doubled India’s edible oil imports in the decade to 2015

WrittenBy:IndiaSpend
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Pushed by the rising use of oil as a medium for cooking in rural areas and the falling production of oilseeds, India’s edible oil imports more than doubled in the decade to 2015, according to ministry of consumer affairs data.

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Consumption in rural households rose 40% and urban, 29% between 2004 and 2012, and oilseed production declined 7% between 2005 and 2012, according to a August 2015 reportfrom the ministry’s department of food and public distribution.

Source: Department of Food and Public Distribution, Ministry of Consumer Affairs. *According to news reports.

Source: National Sample Survey Organisation reports; 68th, 66th and 61st rounds.

Indian use of edible oil has varied based on prices and availability, but demand appears uninterrupted, a likely consequence or rising population and growing prosperity.

“Growth has also been driven by government policies relating to oilseeds production, domestic processing and imports, all of which have affected the edible oil price and demand in the country,” said this May 2016 report by ICRA, a management consultancy.

“With India’s population increasing from 541 million in 1971 to 1.02 billion in 2001, and to 1.28 billion at present; and per capita income growth rising throughout the last three decades, consumption growth in India has been almost uninterrupted till recently. Consumption growth has been variable in recent years, primarily because of sharply higher product prices.”

Indian oilseed production cannot cope

Edible oil is produced from oilseeds, and the department of food and public distributionreport suggests that production of edible oil seeds fell by a million tonnes over a decade ending 2015.

Source: Department of Food and Public Distribution, Ministry of Consumer Affairs

Some reasons proffered for stagnant production of oilseeds:

  • Erratic rainfall is the main reason, according to the government.
  • Farmers are losing interest in oilseeds; yield not worth the cost.
  • Farms producing oilseeds have moved to rice and wheat, according to this November 2014 report from the Indian Institute of Management, Ahmedabad.

As demand rises, imports are taxed to protect domestic manufacturers

The government hiked import duties on edible oils to protect the domestic industry, the Times of India reported in September 2015, from 7.5% to 12.5% on crude edible oil and from 15% to 20% in 2014-2015 on refined oil.

Imports now account for two-thirds of the India’s edible oil demand, which is unlikely to reduce as the population grows and incomes continue to increase. The consumer is likely to pay for taxes imposed on imports.

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