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Vegetable oil consumption has increased following a rise in household incomes and consumer
demand. India imports more than half (54%) of its edible oil requirement, making it the world’s third-
largest importer of edible oil. The country buys soya oil from Argentina & Brazil and palm oil from
Malaysia & Indonesia. Currently, India accounts for 11.2 per cent of vegetable oil import and 9.3 per cent
of edible oil consumption.
Oilseed cultivation is undertaken across the India in two seasons, in about 26 million hectares;
mainly on marginal lands, dependent on monsoon rains (un-irrigated) and with low levels of input usage.
Yields are rather low at less than one ton per hectare. Of the edible oil crops, only oil palm has the
potential to increase the yield per hectare, in a short time with YPH of 4 to 6 tonnes oil per hectare. In
addition, unlike annual oilseed crops that need to be sown every year, oil palm has a productive life of
about 25 years. This is the reason, Indian Govt. has allocated 300 crores in current budget year to promote
the oil palm cultivation and support the farmers during initial unproductive phase (4 years) of oil palm
cultivation, this budget outlay would be continued for few more years to bring edible oil production to
higher level and reduce the dependency on imports from south Asia.
The opening of India’s economy and increasing exposure to world trends in cuisine and other
areas has slowly brought olive oil to the attention of health-conscious Indians. The growing popularity is
shown in the increase in imports of olive oil, which has gone up from 2300 tonnes in 2007 to around 4500
tonnes in 2008. Demand is estimated to increase to 42,000 tonnes in 2012, with the growing middle class
affluence and concerns about health and fitness.
Groundnut, Soybean and Rapeseed, together account for over 80 percent of total cultivated
oilseeds in India. Mustard seed alone contributes Rs.120,000 Mln. turnover out of Rs.600,000 Mln.
oilseed based Sector domestic turnover. Cottonseed, Copra and other oil-bearing material too contribute
to domestic vegetable oil pool.
Since domestic edible oil only supports 46% of domestic consumption, India imports the edible
oils from different regions of world. India imports its palm oil requirements from South East Asia and
soyabean oil from South America. As shown in Fig. 3, major share of Indian edible oil imports is
occupied by palm oil, followed by soyabean and sunflower.
Oil meal:
year Total Soybean Rapeseed Groundnut Castor seed Rice
Bran
Statutory Regulations:
The Vegetable Oil Industry is administered through the following regulation orders which are
statutory in nature and derive their powers from the Essential Commodities Act: Vegetable Oil Products
(Regulation) Order, 1998; Edible Oils Packaging (Regulation) Order, 1998; Solvent Extracted Oil, De-
oiled Meal and Edible Flour (Control) order,1967.
Duty Regime:
Custom Duty: With effect from 1st April, 2008, the customs duty on crude and refined forms of Palm
Oil, Palmolein, Palm Kernel Oil, Soyabean Oil, Rapeseed/Mustard Oil, Sunflower Oil, Safflower
Oil, Groundnut Oil, Coconut Oil and some other Vegetable Oils has been reduced to zero percent and
7.5% respectively. The customs duty on all grades of olive oil has been reduced to 7.5 percent from the
previous 45 percent on virgin olive oil and 40 percent each on refined olive oil and olive pomace oil.
Import Duty: The import duty on crude edible oils has been abolished and duty on refined edible oils
has been lowered to 7.5%.
Value Added Tax (VAT): There are differences in the percentage rates and rules from State to State
under VAT for oilseeds, oil meals, oilcake and oils. There is an element of 4% VAT on edible oils /
oilseeds plus octroi and other local taxes on edible oils imposed by the state governments, which accounts
to nearly 6 to 7%. The VAT on Olive oils is also charged at the rate of 4% by the Indian States.
100% Foreign Direct Investment (FDI) is allowed in Indian vegetable oils and vanaspati industry through
the automatic route. Moreover in the Food processing sector and the Private oil refineries sector 100%
FDI is allowed through the automatic route.
Market Trends:
• The total market size of Indian edible oil industry is at Rs. 900 billion and import-export
trade is worth Rs.320 billion. India being deficient in oils has to import 50% of its
consumption requirements.
• Domestic edible consumption stood at 17 Mln. tonnes in 2011-12 and would reach 24.5
Mln. Tonnes by 2015 if the current growth rate of demand persists. Table 3, shows the
projections in demand of edible oils along with changes in key drivers of demand (growth
in population and per capita consumption).
• Govt. of India has taken many steps to raise the domestic production of edible oils, as this
would reduce the imports bill of edible oils (2nd after petroleum products). Some of the
measures include raising minimum support for different oil seeds, allocation in budget for
raising levels of the palm oil and soya bean cultivation.
• The total size of the olive oil market in India is around 4 million euro in terms of value
and 2,000 tonnes in terms of volume, out of which Spanish companies command a share
of about 60%.
• Currently, India accounts for 7.4% of world oilseeds output; 6.1% of world oilmeal
production; 3.9% of world oilmeal export; 5.8% of world vegoil production; 11.2% of
world vegoil import; and 9.3% of the world edible oil consumption.
• India consumes over 7.5 million tons Palm Oil and other Palm Oil Products per
annum, while domestic production of Crude Palm Oil in India is hardly 60,000 tons per
annum and rising very slowly.
• Indian edible oil industry is dependent on imports, so the domestic prices are reflection of
international prices. Any change in situation of countries like Indonesia, Malaysia,
Argentina and Brazil would affect the domestic prices of edible oils, as was evident after
the tsunami in Indonesia. Another factor affecting the prices of edible oils is the levels of
biofuel usage in USA, in winter some of the vegetable oils are diverted to biofuels
leading to higher prices.
• Growing preference for branded edible oils, because of hygiene factors and health
reasons.
Groundnuts:
India ranks second in the world (after China) in groundnut production. The three southern states of
Andhra Pradesh, Tamil Nadu, Karnataka and the western state of Gujarat together account for close to
80% of the annual output in India. Regional trends in groundnut production indicate that the recent
increase in groundnut yields has mainly occurred in Tamil Nadu due to increased irrigation. Although
Tamil Nadu accounts for 12% of the total area under groundnuts, it contributes to 22% of the total
production.
Rapeseed-Mustard:
India ranks fourth (after China, EU and Canada) in the world in the production of Rapeseed. Almost 40
percent of the rapeseed output comes from the state of Rajasthan. Other major states include Uttar
Pradesh (18%), Madhya Pradesh (10%) and Haryana (11%). Yield improvements have taken place in all
the major states although Haryana shows the maximum growth in yields in the last two decades.
Soybeans:
In India Madhya Pradesh is the leading state in producing soybean followed by Maharashtra, Rajasthan
and Uttar Pradesh. On an average, Madhya Pradesh produces 74 percent of India's total soybean crop;
Maharashtra, 13 percent; and Rajasthan, 10 percent. The crop has exhibited a vast potential as a monsoon
season crop mainly in Central India, and is extending its coverage in the Southern parts of the
country.
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