Indian state bets big on palm oil to cut vegetable oil imports by $19 billion

Indian state bets big on palm oil to cut vegetable oil imports by $19 billion

Pullarao Daravathu and thousands of fellow farmers from Telangana in southern India are busily planting oil palms as their home state aims to add more acreage under the controversial crop within four years than the entire country has done in decades.

Telangana is targeting 2 million additional hectares of oil palm cultivation over the next four years and is doing everything it can to achieve this goal – from building major dams and irrigation canals to importing millions of sprouted sprouts.

Generous government subsidies and huge profit potential compared to other crops also encourage farmers like Daravathu to switch to oil palms.

“Oil palm returns more than 200,000 Indian rupees ($2,536) per hectare to farmers who planted the crop a few years ago. In rice, I struggle to earn 40,000 rupees even after a lot of effort,” said Daravathu, who planted it. of oil palms on his 5-acre farm in Sathupally, nearly 300 km (186 miles) east of Hyderabad, the state capital.

The recent rise in palm oil prices has more than doubled the prices of bunches of fresh fruit, which farmers sell to oil mills.

For years, price volatility, water scarcity and a gestation period of nearly four years have limited oil palm plantations in India to less than 1 million hectares, mainly in the coast of Andhra Pradesh, the state from which Telangana was carved in 2014.

But Telangana, which occupies an area inland on the Deccan Plateau, is now eager to become India’s main palm oil hub, with an area target that would make the state the world’s fifth largest oil palm grower — currently from a negligible base.

The move could reduce India’s imports of giant vegetable oil, which cost the country a record $18.9 billion a year ago, and widen the national trade deficit.

India meets two-thirds of its demand for vegetable oil by importing about 14 million tons annually, of which about 8.5 million tons are palm oil.

The federal government is keen to increase palm oil production to curb those expensive imports, pushing inflation to multi-year highs this year after top supplier Indonesia abruptly halted exports.

“In the next four years, most of the palm planting would be done, and after 7-8 years, Telangana could produce 4 million tons of palm oil,” L Venkatram Reddy, director of Horticulture at the state government, told Reuters.

India currently produces less than 300,000 tons of palm oil and depends on imports from Indonesia, Malaysia and Thailand to meet its requirements.

Even if Telangana manages to grow palm oil on just 1 million hectares and produce 2 million tons of palm oil, it would be a huge feat, said Chava Venkateswara Rao of Godrej Agrovet Ltd, the country’s largest palm oil producer.

Until last year, the country added about 35,000 hectares of oil palm every year.

water first

Some areas in Telangana have enough water for thirsty oil palms thanks to rivers such as the Godavari, Krishna and Bhima. But many pockets had insufficient water to meet the oil palm’s needs, up to 265 liters per tree per day.

To remedy that, the state has built massive elevator irrigation projects and a canal network that now allows farmers to plant oil palms across most of the state.

“We used to face water scarcity in the summer season. Now, with the Kaleshwaram elevator irrigation project, we have enough water for oil palms,” said farmer Bollampalli Venkateshwar Rao, who planted oil palms on 12 hectares.

The Kaleshwaram irrigation project, which is nearing completion, cost the state 1.15 trillion rupees ($14.44 billion).

Authorities will only authorize oil palm cultivation after farmers install water-saving micro-irrigation systems, Reddy said, adding, “The central and state government subsidies cover almost the entire cost of the drip irrigation system.”

The shift to palm oil from paddy and other crops could help the state cut its annual purchase of paddy rice by about 2.5 million tons and cut electricity bills for elevator irrigation projects by 15 billion rupees as drip-fed oil palms require less water. then paddy, said Reddy.

Ravi Mathur, who heads the Indian Institute of Oil Palm Research (IIOPR), a government-backed body at the forefront of the oil palm push, said the elevator irrigation project has enabled oil palm planting in areas previously were unsuitable for the crop due to water scarcity.

Planting stock scarcity

While thousands of farmers are eager to switch to palm oil, the availability of seedlings is limited and preparing them is a lengthy process that takes almost a year.

Companies operating in Telangana imported 12.5 million sprouts last year and made seedlings for about 200,000 hectares this year, said an official from state-owned TS Oilfed, the country’s largest importer of sprouts.

The state aims to import 15 million sprouts this year — mainly from Indonesia, Malaysia, Thailand and Costa Rica — and 50 million next year to meet the target, he said.

But only a handful of companies supply sprouted sprouts.

“There has been a sudden surge in demand following a rise in palm oil prices. Companies cannot supply as much as we need this year,” said Sougata Niyogi, a top official at Godrej Agrovet. “Next year, the supply situation should become more comfortable.”

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