Briefing

Imports Keep Edible Oil Prices in Check Despite Low Domestic Production

An article in the Sunday edition of the Indian Express (see link below) by its Rural Affairs Editor Harish Damodaran traces the evolution of India’s edible oil industry from traditional pressing to solvent extraction to refining. It reveals the eclipse of groundnut oil as a cooking medium by cheap, imported palm oil and the lapse of iconic brands into nostalgia.

At 20.08 million tonnes in 2014-15, India consumed nearly nine times the quantity (2.29 million tonnes) as in 1973-74. Imported oils met 63 percent of the demand. They cost $10.62 billion.

Palm oil is the most consumed cooking oil with 45 percent share, followed by soybean (20 percent), mustard (10 percent), sunflower (9 percent) and cottonseed (7 percent).

The share of groundnut oil has shrunk from 58 percent 40 years ago to one percent now. ‘It is better that we call it a dry fruit and not oilseed,’ says Atul Chaturvedi, CEO of Adani Wilmar.

India is fundamentally uncompetitive in oilseeds and there’s no alternative to exports, Chaturvedi says.

Imports are the reason why oil prices have not kept pace with prices of pulses, despite deficit production.

China is the biggest consumer of edible oil at 34 million tonnes of which about 15 million tonnes is imported.

Dalda was the first vanaspati (hydrogenated vegetable oil) brand. It was launched by Hindustan Unilever (Lever Brothers then) in 1937. The brand is now owned by Bunge, an American commodities trading corporation.

The first solvent extraction plants were established in the 1940s. They got a boost in the 1970s with soybean cultivation gaining ground in Madhya Pradesh, Rajasthan and Maharashtra.

Unlike bullock-driven (kachchi ghanis) and screw-type presses which squeeze out about 85 percent of the oil, the use of edible hexane as solvent can help recover 99 percent of oil in seeds. It makes oil extraction from low-oil bearing soybean, rice bran and cottonseed cake possible.

In the 1980s, India embarked on a policy of import substitution. Domestic production doubled from 10 million tonnes to 21 million tonnes, but was not sustainable. Imports shot up when tariff barriers were removed and duties were lowered to 65 percent in 1994.

Regional oil preferences vary. Mustard and soybean are preferred in the north; sunflower, soybean, cottonseed and groundnut in the west; mustard, soybean and sunflower in the east; and sunflower, sesame, palmolein, groundnut and coconut in the south.

The oil processing industry has shifted from expelling and solvent extraction to refining.

Corporates like Ruchi Soya, Adani Wilmar, Cargill India, Bunge India, Liberty Oil Mills, Emami Agrotech and JVL Agro are the big players.

Imported palm  oil is not all used in cooking. It is used commercially in mithais, namkeens, bread and biscuits and also to adulterate more expensive oils.

To know more read The Other Oil by Harish Damodaran, Rural Affairs Editor of the Indian Express.

(Top photo: The Dalda brand had  evolved over time like the Indian edible oil industry. Credit: www.madinahmarket.com)

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