Modi to bet $1.5 bil­lion on palm oil plan as im­ports surge

The Pak Banker - - BUSINESS -

In­dia plans to spend $1.5 bil­lion in the next three years to help farm­ers grow oil palm trees in an area the size of New Jersey, gov­ern­ment sources said, with Prime Min­is­ter Naren­dra Modi push­ing to make the na­tion self-suf­fi­cient in ed­i­ble oils this decade.

Modi is tar­get­ing In­dia's $10 bil­lion im­port bill for ed­i­ble oils, its third-high­est over­seas spend af­ter oil and gold, and has al­ready been con­sid­er­ing buy­ing oilseeds di­rectly from farm­ers and boost­ing gov­ern­ment sup­port for grow­ing rape­seed, soy­beans and peanuts.

A suc­cess­ful In­dian push into palm cul­ti­va­tion would drag on in­ter­na­tional mar­kets for the com­mod­ity, hit­ting In­done­sia and Malaysia as they are cur­rently the only ma­jor grow­ers of the crop. "We've iden­ti­fied nine states with suit­able cli­matic con­di­tions but we were ap­pre­hen­sive that the long ges­ta­tion pe­riod would dis­suade farm­ers from adopt­ing the crop," said one of the sources in­volved in the plan­ning.

He de­clined to be named as he was not au­tho­rised to speak with media. "That's why we've de­cided to ear­mark 10,000 crore ru­pees ($1.53 bil­lion) that will largely be spent on sup­port­ing the farm­ers."

Palm, the high­est-yield­ing peren­nial ed­i­ble oil crop, needs a frac­tion of the area used to grow other oilseeds, po­ten­tially at­trac­tive in a coun­try like In­dia where land is in­creas­ingly scarce as the pop­u­la­tion rock­ets. But a ges­ta­tion pe­riod of up to five years and laws lim­it­ing the size of each palm de­vel­op­ment have stymied pre­vi­ous ef­forts to switch to the crop, putting off lo­cal farm­ers as well as com­pa­nies such as Ruchi Soya , Cargill and Bunge .

How­ever, the gov­ern­ment hopes that its $1.5-bil­lion back­ing will make the dif­fer­ence, with sources say­ing that di­rect sup­port from Modi will also be key. "It's a pity that we couldn't meet our ear­lier tar­gets," said the first source. "But he fact that the prime min­is­ter is giv­ing a lot of im­pe­tus due to un­bri­dled ed­i­ble oil im­ports, we're try­ing our best to make it hap­pen this time."

The gov­ern­ment is mostly tar­get­ing fal­low farm­land in coastal states such as Ma­ha­rash­tra and Kar­nataka to grow palm on 2 mil­lion hectares, which could pro­duce 8 mil­lion tonnes of oil an­nu­ally once the crop bears fruit in about five years, another gov­ern­ment source said.

Food min­istry spokesman N.C. Joshi de­clined to com­ment. In­dian con­sump­tion of veg­etable oils has tre­bled over the last 20 years as the pop­u­la­tion grows and in­comes rise, while out­put has in­creased by less than a third. That has forced it to be­come the world's big­gest im­porter of ed­i­ble oils, with palm oil ac­count­ing for 80 per­cent of that.

An­nual ed­i­ble oil im­ports have risen 12 times to 14.4 mil­lion tonnes per year, with the prod­uct used to make ev­ery­thing from bha­jis and birya­nis to potato chips and noo­dles.

Togar Si­tang­gang, sec­re­tary gen­eral of the In­done­sian Palm Oil As­so­ci­a­tion, told Reuters that In­dia's plan would in­crease pres­sure on the South­east Asian na­tion to use more biodiesel, made with palm, at home. The Malaysian Palm Oil Board de­clined to make im­me­di­ate com­ment.

Since In­dia's first ma­jor at­tempt to cul­ti­vate palm more than two decades ago, the area de­voted to the crop has risen to about 200,000 hectares from around 8,600 hectares.

The coun­try last tried to boost palm cul­ti­va­tion in 2010/11 by set­ting a tar­get to pro­duce 4 mil­lion tonnes of oil in five years. Out­put has not risen above 70 tonnes a year. Some in­dus­try of­fi­cials were scep­ti­cal the latest push would work with­out changes to the law.

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