India Likely to Launch Plans to Increase the Production of Oil Seeds & Cut Imports of Vegetable Oil in Budget 2021

India is expected to announce a five-year initiative in next week's federal budget to slash costly vegetable oil imports worth $10 billion a year by providing farmers with financial incentives to turn to grain oilseeds, three senior government officials said.

In India, the world's largest purchaser of cooking oils, higher oil demand will cut imports of palm oil from Malaysia and Indonesia and cut purchases of soy oil and sunflower oil from Brazil, Argentina, Russia, and Ukraine.

The officials, who requested not to be identified as the talks are still confidential, said the proposal could cut India's import bills significantly.

'Any nation of India's size cannot manage to be too heavily dependent on imports of edible oil, and that's why you're likely to see a new drive to increase domestic oilseed production in the upcoming budget,' said one of the officials.

The government has already laid out an ambitious five-year program aimed at raising the country's oilseed production from over 30 million tonnes to more than 47 million tonnes now, the official said.

‘A budgetary allocation of 180 billion rupees to 200 billion rupees is expected to be in effect,’ he added.

The transition to oilseeds will also minimize India's surplus wheat and rice supply and effectively cut billions of dollars in subsidies on a food grain procurement scheme that farmers believe New Delhi would choose to discontinue after the implementation of new agricultural laws by the government.

For months, thousands of farmers have been demonstrating against the latest laws on the outskirts of New Delhi that they say support big private buyers at the detriment of producers.

India's imports of vegetable oil, the third-largest import item after crude oil and gold, soared from 4 million two decades ago to 15 million tonnes.

Trade projections indicate that by 2030, imports of vegetable oil could exceed 20 million tonnes, boosted by an increasing population with higher incomes and an appetite for curries and deep-fried food.

The government will encourage farmers, especially from states like Punjab, Haryana, Uttar Pradesh and Madhya Pradesh, to turn from rice and wheat to sunflower and rapeseed, a second official said.

'Farmers will not turn to oilseeds unless any future losses are paid for, and that is why the government aims to offer a subsidy per hectare for the switch,' he said.

Oilseeds are now mostly grown in rain-fed areas that affect crop yields, but states such as Punjab and Haryana can expect higher yields with successful irrigation, farming experts claim.

If successfully introduced, the new policy will help India increase its production of edible oil from a little over 10 million tonnes now to 18 million tonnes, both officials said.