Annual Cost to Economy for neglecting Oil-seed Sector

Vijay Sardana
Vijay Sardana

 Annual Cost to Economy for neglecting Oil-seed Sector

 Friends, you all must be shocked to see the title and you must be saying, this is not a fact, I also wish if I am wrong but unfortunately facts are more dangerous than most of us think. Please take out your calculator and do some calculation with me.

Unfortunately, if we continue the way we are working today, by 2019 and 2024 election years, situation will be very grim.

You all must be thinking, why I am linking to the election year? I will prefer to use all food security parameters as Key Performance Indicators for the ruling government and Prime Minister when they will go for re-election to renew the mandate.

Politically also to ensure that minimum food security, it must be based on domestic production and not based on imported food to protect our strategic and sovereign national interests. If we are food insecure, we will lose our bargaining power at international forums. It is well-known fact that beggars are no choosers.

Ground Reality:

According to author’s estimates, if we do not review our oilseed production and edible oil trade policy towards, the cost of this negligence will be more than 100 Billion per year by 2025.

     1.The foreign exchange requirement for imported edible oil, according to conservative estimates, will be about USD 40 to 50 billion by 2025. And

     2.The loss of livestock productivity and low production due to a shortage of protein thorough oil cake and oil meals will be about additional USD 50 Billion per year.


Demand Side Analysis for Oilseeds and Edible Oils in India:

Projected Per-capita Income of India in 2025

According to the Chairman of Prime Minister’s Economic Advisory Council (PMEAC), it has been estimated if we grow at 9 percent per annum, India’s per capita GDP will increase from the current level of USD 1,600 to USD 8,000-10,000 by 2025. It looks more on the optimistic side, with this growth; India will become part of the middle-income group of countries when it achieves $ 8000-$ 10,000 per capita income. In order to plan the commodities, requirements let me take a conservative estimate growth rate of 5% and per capita income will be around USD 3,000 per year.

Projected demand for edible oils and oilseeds by 2025:

According to an FAO study, food energy requirements for the South Asian population will be about 2700 Calories/person/day in the year 2025.

In terms of edible oil demand, currently it is about 22 million tons, it is estimated that it will be about 20 to 22 kg per capita per year. It means India will need about 30 million tons of edible oils by 2025. It means with an average yield of about 30% oil from oilseeds, we will need about 80 million tons of oilseeds. If the yield is less India will need more seeds for oil production.

Supply Side Analysis for Oilseeds and Edible Oils in India:

With the projected demand of about 80 million tons of oilseeds to produce about 23.8 million tons of edible oils, India will need two vital natural resources i.e. water and land.

Land Availability for cultivation

According to Minister of Agriculture, India will have about 0.12 ha. per capita land for cultivation by 2025. The net sown area is 140.02 m ha and it remains unchanged for last two decades. Total Arable land is about 182.47 m ha which is about 55% of India’s reporting area and about 11% of world’s arable land, out of this only one-third of cultivated land is irrigated and producing 55% of food grains

About 78.17 m ha (2010) of arable land is rainfed contributing to 45% of Agricultural production including oilseeds. At the same time, we have about 120 million ha. is degraded lands.

With the current productivity levels of 1.10 tons per hectare, we will need about 73 million hectares of land to produce 80 million tons of oilseeds. Where is the land for this much oilseed production? This will about 52% of the total agriculture land in India. Currently, about 55% of agriculture land is already used to cultivate food gains i.e. cereals. It means with the existing level of productivity and competing use of agriculture land, it is impossible to meet the growing demand of oilseeds and edible oils by domestic production.

Growing Water Requirement and Reduced availability:

According to Minister of Agriculture, India will have about 1700 m3 of water per person and 84% of this water will be used for irrigation purpose. This is at stress level.

Water availability for agriculture is estimated to go down by up to 12 percent from the current level by 2025 from the current level.

The fact is due to growing demand for food, farmers will require 25 percent more water in 2025 than what they are consuming currently to produce food for feeding the domestic population.

By 2025, the water requirement for irrigation will be 790 billion cubic meter.

Where is the water?

India will remain a net importer of edible oils:

According to authors estimate, the best of the efforts and resources India will not be able to produce more than 60 million tons of oilseeds. This will be short of about 20 million tons of oilseeds. If we take the global average in oilseed production, we will not be able to produce more than 40 million tons of oilseeds, which is half of the requirement of oilseeds required to meet domestic demand.

In terms of edible oil, India will always need about 12 to 13 million tons of imported edible oil every year in the year 2025 onwards. It means with the current rate of exchange rate India will spend about USD 18 to 20 billion every year in the import of edible oils. If we take the inflation at the rate of 6% per year and exchange rate unchanged, India will need about USD 40 billion to meet the shortfall of 12 to 13 million tons of edible oils.

For some reason, if we are not able to improve our productivity from 1.10 tons ha to 2.00 tons per hectare, the import bill will multiply.

I request all policy planners to provide us the roadmap for edible oil security for India.

Edible Oilseeds also provide protein for Livestock population, which we are not factoring in edible policy

Today, the poultry feed is more expensive than wheat for human consumption. Milk is touching Rs. 50 per liter because feed for milking animals is also very expensive. Poor quality soybean meal is as expensive as good quality rice for the common man.

According to various data, India will need about 150 million tons of milk, 15 million tons of meat, 16 million tons of fish and 17 million tons of egg.

These all are protein-rich diet. In other words, India will need 48 to 50 million tons of animal protein per year by 2025.

To produce these items, livestock will also need protein. Please don’t expect animals to eat poor quality grass, poor quality feed, and poor quality drinking water and give high-quality milk, high-quality meat, and egg. This is not possible anywhere. Even God can’t help in this.

How must oil meal pr oil cake we will need?

To produce 50 million tons of animal protein, the animal will need about 125 million tons of good quality proteins in the diet. Who will provide? In other words, we are talking about 280 to 300 million tons of soy-meal equivalents. Who will provide this input?

Implications for Indian Economy:

Considering the above facts, India will have to pay USD 50 billion for import of edible oils and at the same time, India will have to forgo the production of livestock products i.e. milk, meat, egg and fish worth USD 50 billion. Today, Indian livestock is suffering due to non-availability of protein for feed application. Poor Milk yield per animal and low meat yield per animal are clear examples. If we are planning high yielding animals they will also need better high nutrient diets for better yield. Garbage-input will lead to Garbage-output. Feeding leftover agriculture waste in fields and grass can’t deliver high performance in animals. Issues of Aflatoxin and other quality challenges will hurt livestock sector.

The net impact of neglecting oilseed sector will cost import bill of edible oil, loss of livestock production and loss of value creation by the opportunity to create local industry and loss of export market for oilseeds, protein and livestock products and food safety issues will be about USD 100 billion to the Indian economy.


Now you may add indirect cost due to the poor health of people and animals, loss of employment opportunity for millions of youths in rural India, tax revenue loss due to less production and current account deficit.

Please also add the cost of dependency on foreign sources for domestic food security and its implication of sovereign economic, political and foreign policy and its implications.

Oilseeds are more crucial than pulses in economic and nutrition terms.

What is the way forward to minimize import dependency for edible oils?

With growing gap between demand and domestic supplies, it is important for Government of India to come out with a time-bound action plan to minimize the dependency on imported edible oils. The growing dependency on imported oil will put pressure on current account deficit and food security of the country.

Oilseeds vital for nutrition security of India:

Oilseeds are not only important source of edible oils but also very vital and important source of protein for animal nutrition as well as human nutrition. Edible oil imports, if not managed properly, will have serious adverse implications on the domestic oilseed sector. This needs a very serious and calibrated policy intervention because of dependency on imports will hurt the local oilseed production. Any adverse impact on domestic oilseed production will increase dependency on imported edible oils but will also affect the supply of oil meal or oil cakes for livestock feed industry and protein source for human and animal nutrition.

Regularly Review Domestic policies and Import duties to promote domestic production:

Ensure Customs duties must be linked to Minimum Support Price. Upward revision of MSP means upward revision of Customs Duty at the same time.  

Unless there is an incentive to produce, no farmer will produce. In order to produce carbohydrates like wheat, rice and sugar government has developed all sorts of systems and incentive plans. Why is same zeal not there for pulses and oilseeds, which are more important for good health? This clearly indicates that agriculture policies lack sound logic and influenced by politics. It is high time, Government of India and all state governments should develop food security plan for India. Please develop a comprehensive plan and communicate to people of India what is their plan to feed 1450 million people by 2025 AD. Otherwise, sorry to say, that piecemeal approaches by self-claimed experts with various motives will leave India with begging bowl to feed her.

Challenges in achieving productivity targets:

Based on the global experience average yield of oil-seeds in the world is about 2 tons per hectare and the best possible average is yield is 3.5 tons per ha in few countries. Considering the global experience, It means, on an average, we will be able to produce about 36 million tons to at the best about 60 million tons of oilseeds per year. In order to meet the production target, we must adopt agro-climatic condition based production policy to include soil health policy to support proper seed technology adoption, irrigation facilities, and required agri-inputs and extension services.

Review Food laws related to edible oils:

Consumers must know what they are eating. Vegetable oil must disclose actual names of the oils used. The nutritional significance of every oil is different and consumer must have informed choice. Food service industry must be told to disclose the oils used. This will create interest of investors in various oil seeds sectors, this will help in bringing better seed varieties and better focus on various oil-seeds sectors. 

Adulteration in oils is also changing consumer behavior and FSSAI has not ensured how to check adulteration in edible oils. Cheap oils are mixed with expensive oils and sold as expensive oils. This is hurting both health and economy of farmers and consumers.


With the launch of blended oils we have lost focus on production and productivity. The whole industry has become trading industry and lost focus on productivity. This must be reviewed to ensure corporate interest in back-end field work. 

High yielding Oilseed Technology: India needs world class seed technology which can give a quantum jump to the oilseed production. India must establish a program to produce high yielding varieties with the help of modern technologies like nanotechnology andnutrigenomics. Success parameters of such seed technology programs must be linked to the best in class in the world.  Only research program where technology is designed to deliver best in the class output should be supported by taxpayers’ money. In order to achieve this even if global collaboration or partnerships are required, we should encourage this. In case anew set of rules and policies are required, it should be done on a priority basis to keeping national interest as a priority.

Minimize Cost of Production: Edible oils will always remain essential components of basic human diet world over. Policies must be designed to encourage which should minimize the cost of production and processing of edible oils. In order to ensure this, if existing laws need to review and amended, it should be done on priority, so that corrective actions can start on time and the country can save time and money.

Transaction cost and time need to be minimized: On one side we have serious issues of ensuring food security, on the other hand, we have various laws which are adding unproductive cost and time lag in achieving food security for the country. It is high time we should review the outdated laws like Agriculture Produce Marketing Committee Act, various acts related to seeds and agro-chemicals, agriculture research and approval processes, etc.

Develop Free Agriculture Production Zone in Countries with less population density:

Countries like Australia, Canada, and African Countries can offer their land bank for production of Oilseeds and pulses which can be mutually beneficial. Today, we are acquiring assets to extract energy and minerals in other countries, explore the similar arrangement for food production as well.

Indian corporate should develop oil-seed and oil palm fields:

In order to ensure regular supplies to Indian markets and to avoid global dependency on edible oil supplies, in place of depending on international traders for domestic demands, Indian corporates should develop capabilities to take the benefit of domestic markets. This will ensure stability for oil supplies and also sustainable profits for Indian corporates. East Africa, Australia, and parts of East Asia can be potential locations for investment provided local governments are keen to allow investments. Look East Policy and Africa Investment Plan can be a starting point to explore these possibilities.

These are few thoughts more can be explored.

I am fully aware that various vested interests will object to any modifications in the existing regulatory and policy framework but in the national interest we should ignore these objections and move towards reforms which can ensure timely delivery and transparency in the decision-making process. 

This will also help India in reducing international pressures on its economic and foreign policies. Food security is a precondition for any sovereign economic and foreign policy. 

Besides improving the food security of India, improvement in oilseeds and edible oil sector will help in generating employment in rural India; provide animal nutrition security which is extremely vital for national food security and also save USD 100 billion worth national wealth every year.

 Think out of the box:

If Malaysia, as a small country, can produce 18 million tons edible oil Indian can do it as well. Will the government do serious planning to revive edible oil sector in India?

Time will tell. We are available to give out inputs.

Do send your views and share this to create wider debate.

Blog by:Vijay Sardana

Mail to me at sangeeta @krishijagran.com

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