Palm reading down to earth november 15 30, 2015

ANALYSIS

PALM

READING Can palm make India self-reliant in edible oil?

JITENDRA | new delhi

REUTERS

A worker unloads palm fruits at a plantation in Sumatra. India imports cheap palm oil from Indonesia and Malaysia

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09/11/15 5:40 PM

ANALYSIS

T

HE INDIAN government plans to invest `10,000 crore in palm oil production

in the next three years to cut down its rising import bill. India is the world’s largest importer of edible oils, of which 80 per cent is palm oil. This is the first big step in decades to raise India’s oilseed production, but the country did no always depend on palm to meet its oilseed demand.

Twenty years ago India became self-sufficient in edible oil production. It was producing enough to meet 97 per cent of its demand and only three per cent of oil was imported. Mustard, rapeseed and groundnut were the main oilseed crops. This changed after economic liberalisation in the mid-1990s as import duty on edible oil was lowered. India began importing cheap palm oil from Malaysia and Indonesia. In 2008, the import duty was slashed drastically leading to a surge in import. Today, the country meets two-thirds of its edible oil demand through imports.

It imports oil worth `66,000 crore to meet 67 per cent of its demand and exports 20 per cent of its oilseeds (including oil and de-oiled cake) worth `23,000 crore. This has increased the current account deficit. Edible oil is now the third largest item India spends on importing, after crude oil and gold.

To reduce the deficit, the government has also increased import duty on refined oil from 15 to 20 per cent and on crude edible oil from 7.5 to 12.5 per cent.

This is not sufficient, says the edible oil industry body, Solvent Extraction Association. “It is neither going to help industry nor farmers. Our demands were of 45 per cent duty on all refined oils and 25 per cent on crude oils so that farmers would be encouraged to grow more and industry would get more raw material,” says B V Mehta, executive director of the association. “In the absence of raw material, we are able to utilise only 40 per cent of the total capacity of machines.”

In the mid-1980s, the government had supported large-scale mechanisation of oil production. This was backed by high import duty of 200 per cent. Within 10 years the area under oilseed crops grew by 27 per cent and the country became self-sufficient in edible oil.

Lowering of import duty changed everything.

Cheap imports depressed domestic prices in the late 1990s, so farmers lost interest in oilseed crops. Ever since acreage and production has remained stagnant.

In 1996-97, about 26 million hectares (ha) were under oilseed farming in India. Today, it is 25 million ha. (see ‘Acreage stagnates’).

In 2002-03, oilseed production plunged to about 15 million tonnes. The government then star-ted procuring through the National Agricultural Coo-

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perative Marketing Federation of India under the price support system and increased import duty.

But such initiatives did not prevail for long. On the recommendation of a committee on “Rationalisation of Customs and Excise Duties on Edible Oils and Oilseeds” in 2005, the import duty was again reduced.

Between 2009 and 2012, the import duty was zero and imported palm oil flooded the domestic market.

While import has surged to 14 million tones, domestic production has stagnated at 6-7 million tonnes.

FARMERS' WELFARE TAKES BACKSEAT Import duty has been kept low under the influence of the World Trade Organization (wto). In 2000, the National Centre for Agricultural Economics and Policy Research, New Delhi, in one of its studies, had warned the government against this. “In the post wto ABHIJIT KAR GUPTA

Acreage stagnates The growth period was 1985 to 1996 Area under oilseed (in million hectares)

1985-86

19

1996-97

26

2004-05

23.5

2010-11

27.2

2014-15*

25.73

Source: Ministry of Agriculture, oilseed division; *Fourth advance estimate

scenario, the farming community with marginal lands in the rainfed areas growing oilseeds need (sic) to be supported by market interventions of higher msp (minimum support price) and also shielded from the onslaught of falling domestic prices of oilseeds owing to unbridled imports of cheap edible oils by keeping reasonably high tariff duties,” the study said.

Yet the government continued to treat it as a matter of demand and supply. “Farmers’ welfare occupies a secondary place while balancing demand and supply,” says agriculture scientist M S Swaminathan.

Certain lobbies are also influencing import policies, alleges R S Deshpandey, former director of the Bengaluru-based Institute of Social and Economic Change. “Strong lobbies are operating in three states, Karnataka, Maharashtra and Gujarat,” says Deshpandey. “These lobbies keep the pressure www.downtoearth.org.in 43

09/11/15 5:27 PM

ANALYSIS

Impact of import duty cuts As India reduced the import duty on palm oil, its import increased. This led to a stagnation in the domestic production of crude and refined oil Production

Import

15

Source: Ministry of Agriculture, oilseed division; The import duty was not revised in 1995, 1997 and 2002

``Lobbies are operating in Karnataka, Maharashtra and Gujarat to keep the import duty low until the domestic price collapses due to imports'' Ð R S Deshpandey, former director, Institute of Social and Economic Change 44 DOWN TO EARTH

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on the Union and state agriculture ministries to keep the import duty low until the domestic price collapses due to massive imports. They then procure oilseed at cheap rates from farmers.”

This is how India’s first edible oil cooperative group Dhara, developed under the Yellow Flow Revolution in the late 1980s, was stamped out, Deshpandey says.

“One the one hand, the lobbies kept the pressure to keep import duty low. On the other hand, they procured domestic oilseed at cheap rates to either export it or supply it to other states.” This drove Dhara out of the market, he adds.

Other experts say import duties were lowered to contain food inflation. “The oilseeds sector was liberalised due to high domestic price, which was pushing up the inflation rate,” says Abhijit Sen, former member of the Planning Commission. Food inflation is politically volatile, so the consumer is always the winner. “The government always takes care of the consumer by getting cheap edible oil through import instead of strengthening domestic production to help farmers,” says J P Singh, chief consultant for the oilseed division of the Union agriculture ministry.

The oilseed sector needs special attention.

Oilseed crops are sensitive to rainfall fluctuations and are susceptible to pests. But the government has no grand plan to encourage farmers to grow traditional oilseed crops. “At the current rate of decline, groundnut would be wiped out in the next 25 years,” warns A Narayanmoorthy, director, Department of Economics and Rural Development

Sept. 2015

2014

2013

2012

2011

2010

2009

2008

2007

0 2006

0 2005

3

2004

20

2003

6

2001

40

2000

9

1999

60

1998

12

1996

80

1994

Import duty in %

Crude palm oil

Total oil production and import in million tonnes

Refined palm oil

100

at Alagappa University at Karaikudi in Tamil Nadu.

Instead, the government has set its eyes on palm.

IS PALM THE RIGHT CHOICE? To meet its current edible oil demand through domestic production, India needs another 30 million ha of land, says Ashok Gulati, former chairperson of the Commission for Agricultural Costs and Prices, a statutory body that advises the government on the pricing policy. “It is impossible to get land for such cultivation. Only investment in palm oil over 2 million ha of area can solve the problem,” Gulati says. “The identified area of Andhra Pradesh is suitable for palm oil farming.”

But palm cultivation is said to be highly damaging to the environment. “Studies show palm oil cultivation has terrible socio-economic and environmental fallouts. It impacts forests and critical habitats of endangers species; causes soil erosion and air, soil and water pollution; and contributes to climate change,” says Chandigarh-based food and agriculture analyst Devinder Sharma. When Down To Earth approached agriculture ministry officials, they denied any knowledge of the plan to grow palm on a large scale.

Another reservation against palm is that it has never been grown on a large scale in India. “Largescale plantation of exotic breeds will never be appreciated. One would have to deal with lots of weeds,” Singh says.

Is the government prepared for a large-scale experiment?

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ANALYSIS

SATURATED WITH DOUBTS

Palm is the most consumed oil in India but its health impacts are questioned KARNIKA BAHUGUNA | new delhi

T

ILL 1990S rapeseed, mustard and groundnut

consumer, the palm industry has coined the term “sustainable palm oil”. Sustainable palm is produced in plantations that meet environmental standards. It does not require clearing tropical forests and does not contribute to global warming. Various multinational giants have made commitments to source certified sustainable palm oil. These include Unilever, Walmart, McDonald’s, Cargill, Nestle and Procter & Gamble.

The onus of procuring sustainable palm oil is often put on India and China since they are the largest consumers of the commodity. However, the tag of environmental sustainability does allay doubts about palm oil’s health impacts.

95% of the imported palm oil is used as edible oil, half of which is in the form of oil, while 20% is in the form of hydrogenated vanaspati

HOW HEALTHY IS PALM OIL? Palm oil is often seen with suspicion because it is high in saturated fat. This type of fat is associated with high levels of “bad cholesterol”, ldl, which is a risk factor for heart disease. But science is so far inconclusive about the health impacts of palm oil. A small but growing section of scientists is questioning the role of saturated fat in the disease development.

Picking up this clue, Credit Suisse Research Institute that caters to investors has analysed recent medical research on fat. Its report refutes nutritional ABHAY IARI

were the dominant edible oils produced and consumed in India. Today, palm oil, soybean oil and mustard oil are the three most consumed edible oils in the country. Their respective shares in consumption were 43, 17 and 13 per cent in the past two years, says a 2011 report by the research firm icra. Future growth in edible oil industry too is expected to be led by palm oil. Indian industry estimates show India is expected to import 9-9.5 million tonnes of palm oil in 2015-16.

Refined vegetable oils often contain palm oil, unless the label clearly lists the ingredients. Most of the palm oil is consumed in low-income houses, considering it is the cheapest edible oil available in the market and also widely distributed through the public distribution system (pds), says A Laxmaiah, scientist at the National Institute of Nutrition. Palm oil has been dominating the vegetable oil market in India since 2010. Ninety-five per cent of the imported palm oil is used as edible oil, half of which is in the form of oil, while 20 per cent is in the form of hydrogenated Vanaspati, according to wwf-India that runs a campaign about the adverse environmental impacts of palm oil industry. To look attractive to the

A groundnut farm in Junagarh, Gujarat.

Groundnut oil was one of the primary oils used in the country till 1990s

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09/11/15 5:38 PM

VIKAS CHOUDHARY / CSE

Palm oil consumption increases cholesterol levels more than unsaturated vegetable oils

Increased palm oil consumption is related to higher rates of Ischemic heart disease mortality in developing countries 46 DOWN TO EARTH

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wisdom that recommends lower intake of foods rich in saturated fats, including butter, lard, milk, red meat, coconut oil, and those rich in cholesterol like eggs, poultry and beef. The report says that the intake of saturated fat (butter, palm, coconut oil and lard) poses no risk to our health and particularly to the heart.

But studies also show that on certain parameters palm oil compares poorly with other unsaturated vegetable oils. A study published in the Journal of Nutrition in July 2015 showed that palm oil consumption increased ldl cholesterol compared with vegetable oils low in saturated fat. The researchers reviewed the effect of palm oil consumption on blood lipids compared with those of other cooking oils using data from clinical trials. The data showed that palm oil significantly increased ldl cholesterol by 0.24 mmol/L compared with vegetable oils low in saturated fat.

Coconut oil, which is also high in saturated fat and is consumed in parts of India, may be better than palm oil. A study in Pharmaceutical Biology published in September 2015 showed that consumption of virgin coconut oil had a cardio-protective effect on rats and reduced damage caused by heated palm oil diet. The study showed that the consumption of heated palm oil increased lipid peroxidation and ace (angiotensinconverting enzyme) activity in heart which is related to blood pressure.

This could be inhibited by virgin coconut oil supplementation. The increases in the myofiber width and area as well as the decrease in nuclear size in rats fed heated palm oil were significantly prevented by virgin coconut oil supplementation. These results suggest that virgin coconut oil supplementation possesses prevents the increase in blood pressure via an antioxidant mechanism in rats repeatedly fed heated palm oil.

It must be noted that this study did not compare heated coconut oil with heated palm oil.

Another research paper, published in the journal Global Health in 2011, concludes that increased palm

oil consumption is related to higher rates of Ischemic heart disease (ihd) mortality in developing countries.

The study analysed country-level data from 19801997 available in the World Health Organization’s Mortality Database, US Department of Agriculture’s international estimates and the World Bank.

Outcomes included mortality from ihd and stroke for people aged 50 and older. Predictors included per capita consumption of palm oil and cigarettes and per capita gross domestic product as well as time trends and an interaction between palm oil consumption and countries’ economic development level.

The researchers found that in developing countries, for every additional kilogram of palm oil consumed per capita annually, ihd mortality rates increased by 68 deaths per 100,000. Stroke mortality rates increased by 19 deaths per 100,000 and were not significant. For historically high-income countries, changes in ihd and stroke mortality rates from palm oil consumption were much smaller. Inclusion of other major saturated fat sources, including beef, pork, chicken, coconut oil, milk cheese and butter, did not substantially change the differentially higher relationship between palm oil and ihd mortality in developing countries.

The controversy is yet to be resolved. Laxmaiah recommends that excess consumption of palm oil could be regulated through educating the masses about the harmful effects of its excessive consumption.

“My primary point is that any particular oil is not safe for consumption. There should be a balance of various oils in one’s diet except trans fats. We recommend a mix of various oils in the diet.”

Nutritionist and author Rujuta Diwekar thinks the Indian government, dieticians, doctors and celeb chefs should champion the cause of local oils and ghee, like the European Union does for olive oil. “We must sing the glories of our oils and the therapeutic ghee before the West or the Weight loss industry does,” Diwekar wrote in her blog. n 16-30 NOVEMBER 2015

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