Making palm oil attractive again

By: |
August 28, 2020 6:15 AM

To avoid collateral damage, the domestic industry has adopted the Indian Palm Oil Sustainability Framework in association with an NGO. This is similar to the best practices adopted by the Roundtable on Sustainable Palm Oil (RSPO), which has oil producers, processors, traders, industrial users, banks and NGOs as members. Currently, about 15% of palm oil production meets this standard.

During the first half of this oil marketing year (November 2019 to April 2020), palm oil imports were 29% down over the same period the previous year.

The impact of Covid-19 on cooking oils has been uneven. The demand for palm oil—used mainly in hotels, restaurants and cafes, and for confectionary, bakery items and fries—has suffered the most. In homes that can afford ‘soft oils’ like mustard, soybean and sunflower, it is not the preferred choice. Malaysia and Indonesia, the biggest suppliers of palm oil, and Indian oil sellers would like to change that.

During the first half of this oil marketing year (November 2019 to April 2020), palm oil imports were 29% down over the same period the previous year. Soybean and sunflower oil imports rose 13% and 12%, respectively. The share of palm oil in imports was high, at 53%, during this period. But it was down from 64% during the year-ago period. Industry observers expect palm oil imports during the 12 months to November 2020 to contract to 7.5 million tonnes against an annual average of 9 million tonnes over the past couple of years.

“I have been trading for a decade. Indian traders only ask me bhav kya hai (what’s the price)? That’s the biggest concern,” Sandeep Bhan, COO, Global Trading, Sime Darby Oils, a Malaysian company, said at a recent online seminar. Palm oil was supplied through ration shops in the 1970s. Since then, the inexpensive oil has been perceived as ‘cheap’. It is also shunned as unhealthy, because of high saturated fats, which are associated with stroke and heart disease.

Palm oil is not usually seen in middle class homes. Angshu Mallick, deputy CEO of Adani Wilmar, which sells cooking oil under the Fortune brand, says only 18% of it is consumed in homes. Based on data from market research agencies, he says more than four-fifths of home consumption is in six states: Kerala, Tamil Nadu, Andhra Pradesh, Telangana, Odisha and West Bengal. Rural homes account for a little more than 70% of the household demand, and 86% of them are non-vegetarian. Even in rural areas, the oil is used by SEC ‘C’ and ‘D’ households, i.e. those with assets like a fridge, fan and colour TV, and where the chief earners are matriculates; 90% of them bought palm oil in packaged form, which,for retailers, is a hopeful sign. Mallick says there were 622 brands in April, up from 545 in April 2019.

Palm oil exports are expected to bounce back when institutional demand recovers. But for it to transit from a low-margin commodity to profitable specialty oil, it needs a ‘glow and lovely’ image makeover. Bhan says palm oil has health benefits that need to be communicated.

The Solvent Extractors’ Association (SEA) had fielded a specialist in internal medicine at the online seminar, recommended by the Indonesian Embassy. She said palm oil has the right balance of saturated and unsaturated fatty acids. It has a high smoking point so it is good for frying, unlike liquid oils that needs to be hydrogenated and release unhealthy trans-fats when used for frying. According to her, palm oil is safe and nutritious. “It could the next superfood,” she asserted.

The Malaysian Palm Oil Council also makes such claims. “The notion that palmolein consumption would raise blood cholesterol level and thereby increase the risk of heart disease is unfortunately not based on current evidence,” it says. “The physicochemical properties of palmolein suggest that the oil has little cholesterol-raising potential.” The council claims palmolein is cholesterol-free because it possesses a unique triglyceride molecule configuration. It has more of cholesterol-lowering saturated fats than those elevating it. “Palm oil is indeed good oil,” says Atul Chaturvedi, president of the SEA, who retired in 2017 as the CEO of Adani Wilmar. “It’s nature’s gift to the mankind.”

“Reports of health impacts of palm oil consumption in foods are mixed,” noted Sowmya Kadandale and two others in a paper published in the January 2018 online bulletin of the World Health Organisation. While some studies link it to increased risk of heart disease and higher levels of bad cholesterol, others either show no negative effects or even favourable health outcomes. The four favourable studies out of nine that the authors analysed were supported by the palm oil industry. “The contested nature of the evidence suggests the need for independent, comprehensive studies,” the authors said.

The Indian Council of Medical Research should commission a study as India wants to reduce dependence on imported palm oil by producing its own. Though oil palm cultivation in India began around 1985, progress has been slow—20 lakh hectares have been identified as suitable, but so far only 3.45 lakh hectares have been covered. The oil industry has been demanding plantation status so that land ceiling laws don’t apply and companies that are interested can buy or lease land to set up plantations.

If soft oils were to replace palm oil, much more land would be needed. “It’s an incredibly efficient crop,” says the UK chapter of the World Wildlife Fund. “Globally, palm oil supplies 35% of the world’s vegetable oil demand on just 10% of the land.” If soybean and coconut oil were to be alternatives, four to 10 times more land would be needed, the Fund says.

But the slash-and-burn rainforest clearing practices of the oil palm industry in Malaysia and Indonesia, the lung damaging haze episodes and the razing of habitats of endangered species like the orangutan have put palm oil in the crosshairs of environmental and wildlife activists. For these reasons, early last year the European Union excluded palm oil biofuels from renewable energy sources for transportation that would be eligible for subsidy.

To avoid collateral damage, the domestic industry has adopted the Indian Palm Oil Sustainability Framework in association with an NGO. This is similar to the best practices adopted by the Roundtable on Sustainable Palm Oil (RSPO), which has oil producers, processors, traders, industrial users, banks and NGOs as members. Currently, about 15% of palm oil production meets this standard.

Bhan says his company is keen to work with Indian industry and share innovations in palm oil products, processes and packaging. It could collaborate in developing a generic brand like Sime Darby Oils’ Certio, which stands for authenticity, freshness, purity, sustainability and traceabilty.

The ‘Sunday ho ya Monday, roz khao anday’ and ‘Mutual Funds sahi hai’ are marketing campaign templates that the oil industry could adopt, says Mallick. Chaturvedi agrees on the need for prettifying palm oil’s image. But how big the advertising budget should be and what should be the contribution of the Indian, Malaysian and Indonesian palm oil sellers are issues on which there has been little talk.

The author blogs at smartindianagriculture.in. Views are personal

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