After two years of decline, India’s edible oil imports in value terms rose again in oil year 2024-25 (November-October), with forex outgo of $18.3 billion compared with the previous year’s $15.9 billion. The import bill for the current year is projected to exceed $19 billion. Landed cost of edible oil imports spiked after the start of the West Asia war, and is now 11-13% higher year-on-year.
Fresh supply-side price pressures have lately emerged, owing to a likely production slump in Indonesia and Malaysia, the key exporters of these items to India, Jakarta’s roll-out of its “B-50 biodiesel programme” from July 1, and the US’s aggressive biofuel policy. Over 30% of Indonesia’s palm oil output may eventually be diverted to the biofuel sector, reducing the surplus available for exports. Malaysia also has similar plans. For India, which still meets 57% of its edible oil consumption requirement through imports, these developments are expected to impact trade and current accounts and stoke inflation.
Edible oils have become a large item in India’s import basket over recent years. As incomes rose, consumption of these items grew much faster than domestic production. Their imports surged from $9.95 billion in 2019-20 to $19.6 billion in 2021-22, though import volumes have grown at slower rates, roughly in the range of 13-16 million tonnes (MT) during the last five-six years. Clearly, the exporting countries have capitalised on India’s rising demand and its inability to sufficiently scale up domestic production.
Non-essential imports are what could be controlled through policy tools like prohibitions, tariffs, and quantitative restrictions, a notable example being the purchase of gold from overseas. As for goods and minerals that can be domestically produced or extracted, it is reasonable to expect deliberate policy action to curb imports. For example, coal imports suddenly surged a few years ago, but by ramping up domestic mining, considerable foreign exchange has since been saved. A jump in imports of electronic inputs and semiconductor components is nothing to worry about, as these lead to value-added exports and domestic value creation.
To their credit, policymakers haven’t failed to recognise the imperative of boosting edible oil production. A national mission, launched in November 2024, aims to boost primary oilseed production from 39 MT in 2022-23 to 69.7 MT by 2030-31 and achieve self-reliance. India is already the top global producer of rice bran, castor seed, safflower, sesame, mustard, and niger, and it cultivates sunflower, soya bean, and groundnut in large quantities.
Of the total imports of a little over 16 MT of cooking oils in the 2024-25 oil year, palm oil shipments accounted for over 47%, while sunflower and soybean oils accounted for the balance. Therefore, raising palm oil output manifold is critical to self-sufficiency. The oil palm mission has made significant headway over the past decade. However, to raise crude palm oil production from around 0.4 MT now to the targeted 2.8 MT by 2029-30, the cultivated area needs to extend beyond Andhra Pradesh and Telangana.
Cluster-based interventions and improved seed systems can help boost yield. It is equally important to create a robust edible oil processing industry by maintaining a large import tariff differential between crude and refined oils. Frequent tariff revisions could upset the confidence of both farmers and refining units. The support price system must prove effective and remunerative for farmers who grow edible oil plants, instead of only favouring water-guzzling grains.