Indian kitchens demand oil; production declines, imports soar

By Sukanya Bhattacharyya

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.

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

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 a May 2016 report by management consultancy ICRA.

“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,” the report added.

Indian oilseed production cannot cope

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

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 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 per cent to 12.5 per cent on crude edible oil and from 15 per cent to 20 per cent 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.

  (08.07.2016 - In arrangement with IndiaSpend.org, a data-driven, non-profit, public interest journalism platform, where Sukanya Bhattacharyya is an intern. The views expressed are those of IndiaSpend. The author can be contacted at respond@indiaspend.org)