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Scope And Challenges Of Palm Oil Production

2021 SEP 22

Mains   > Agriculture   >   Crops   >   Plantation crops


  • Government of India recently launched a Mission on Oil palm to be known as the National Mission on Edible Oils – Oil Palm (NMEO-OP) as a new Centrally Sponsored Scheme with a special focus on the North east region and the Andaman and Nicobar Islands.


  • Oil palm cultivation assumes significance for augmenting the indigenous availability of edible oil as it is the highest oil yielding perennial crop.
  • Oil palm tree produces edible palm-oil as well as palm kernel-oil.
  • With good planting material, irrigation and proper management, oil palm has the potential to produce 20-25 MT fresh fruit bunches (FFB) per hectare after attaining the age of 5 years.
  • This in turn is capable of yielding 4-5 MT of palm oil and 0.4-0.5 MT palm kernel oil (PKO).
  • In comparative terms, yield of palm oil is 5 times the yield of edible oil obtainable from traditional oilseeds.
  • Palm oil is one of the major oils traded in global edible oil and fat market. At present, it is the largest source of vegetable oil in the world.
  • The global cultivation of palm oil uses only 10 per cent of farmlands dedicated to oilseeds production yet accounts for 35 per cent of the global volume for all vegetable oils.
  • Palm oil is a major source of export revenue for producing countries as the global demand for vegetable oils rises.
  • Most relevant to India is in the potential of palm oil to improve the livelihoods of farmers through its consistent yield once the crop matures.


  • According to Indian Institute of Oil Palm Research:
    • India requires 25 million tons of palm oil every year
    • The country produces around 10 million tons and imports a further 15 million from other countries.
  • India currently produces palm oil on more than 3 lakh hectares of land and plans to cover an additional area of 6.5 lakh hectares by 2025-26.
  • Indonesia and Malaysia together produce 80 per cent of global oil palm.


  • High import dependence:
    • India is the biggest consumer of edible oils in the world.
    • Edible oils form India’s third-biggest import, after crude oil and gold. Of the vegetable oil imports, about 55% is constituted by palm oil.
    • India produces far less than what it consumes annually and the demand is fulfilled by importing vegetable oils. Palm oil is imported from Malaysia and Indonesia
    • More than 94% of the palm oil is used in the food industry, especially for cooking purposes.
  • Increasing price:
    • The price of palm oil increased by over 60 per cent in the past year to Rs 138/kg as of 1 June 2021 from Rs 86/kg on 1 June 2020.
  • Ever increasing demand:
    • The Yellow Revolution of the 1990s led to a rise in oilseeds production. Though there has been a continuous increase in the production of diverse oilseeds — groundnut, rapeseed and mustard, soybean — that has not matched the increasing demand.
  • Poverty eradication
    • Palm oil cultivation has had a positive impact on poverty eradication in Malaysia, increasing income levels of small and marginal farmers.
  • To achieve self-reliance:
    • As an agricultural powerhouse where 60 per cent of India’s population relies on agriculture, it makes complete sense for India to focus on being self-reliant on vegetable oils through the Atmanirbhar Bharat initiative.
    • The plans for self-reliance have identified oil palm as the best crop towards achieving this.
  • Food security and nutrition:
    • Global production and demand for palm oil are increasing rapidly. The cultivation of palm oil is more advantageous than other vegetable crops >> this makes its cultivation critical to global food security and nutrition.
    • Low prices and neutral taste of palm oil enhances oil accessibility to people below poverty lines.
    • Moreover palm oil is versatile in nature and can be easily blended with mustard, coconut, groundnut, and sesame oil which are locally produced and traditionally used vegetable oils in Indian cooking.


  • Cost competitiveness:
    • Compared to other oil crops, the oil palm produces high yields, is easy to cultivate and bears fruit all-round the year.
    • Oil palm produces 10 to 46 times more oil per hectare compared to other oilseed crops and has yield of around 4 tons of oil per hectare.
    • Detailed analysis reveals that 4 million MT of traditional oils is being produced in the country by using 15.80 million hectares of land. This much quantity of palm oil could be produced from just 1 million hectare.
  • Untapped potential:
    • As per assessment by Indian institute of Oil Palm Research (IIOPR), India has potential of 28 lakh ha for palm oil production, out of which more than 9 lakh hectare in the north eastern region.
    • At present only 3.70 lakh ha is under Oil Palm cultivation.
  • Climate change management:
    • The crop has an appreciable level of carbon sequestration potential that makes the crop attractive with reference to climate change management.
  • Export potential:
    • Palm oil has emerged as the main global source of vegetable oil due to adequate availability, versatility in usage and lower cost, as compared to other vegetable oils.
    • Palm oil forms 33% of the world vegetable oil production mix.
    • Global demand for vegetable oils is projected to increase by 46% by 2050.
  • Healthier alternative:
    • Concerns over the health hazards associated with trans-fatty acids (TFA) and genetically modified organisms (GMO) have also raised the demand for palm oil, as palm oil is not derived afrom a GMO nor does it contain TFA.
  • Success stories from Southeast Asia:
    • A significant incentive for promotion of oil palm cultivation comes from the ‘success stories’ of the two Southeast Asian countries, Indonesia and Malaysia.
    • Indonesia has emerged as a significant palm oil hub in the last decade and has overtaken Malaysia.
    • The two countries produce 80 per cent of global oil palm.
  • Less capital required:
    • This is a crop that any farmer can grow without the need for big capital investments to buy land and heavy machinery.
    • The dominant presence of small farmers in Indonesia, Malaysia and Thailand which number over 3 million farmers will attest to that.


  • Geographical barriers:
    • Ideal location of palm oil trees are 80 latitude north and south of the equator. Therefore, India’s geographical position is not ideal for oil palm cultivation
  • Long gestation period:
    • Oil palm has a long gestation period and restricts income flow to farmers for at least 4-5 years.
  • Threat to biodiversity:
    • Studies on agrarian change in Southeast Asia have shown that increasing oil palm plantations is a major reason for the region’s declining biodiversity.
    • Indonesia has seen a loss of 1,15,495 hectares of forest cover in 2020, mainly to oil palm plantation.
    • Destroying rainforests would impede international efforts to combat climate change.
  • Erratic monsoon leading to shortage of water:
    • Oil palm crops require rainfall throughout the year for successful growth.
    • Oil palm cultivation could also negatively impact water tables in the country and the way land is used by farmers and tribal peoples.
  • Social consequences:
    • Legislation allowing the clearing of tree cover and cutting forests for growing palm trees has led to increasing land-related tussles between government officials, locals and agro-business groups in Malaysia and Indonesia.
    • The Northeastern states are politically sensitive areas, and the oil palm initiative could breed tension there.
  • Affects tribal rights:
    • Palm oil cultivation would affect the forest rights of tribal people >> as it may involve clearing of forest land for palm plantations.
  • Against the notion of community self-reliance:
    • The initial state support for such oil palm may result in a major and quick shift in the existing cropping pattern that are not always in sync with the agro-ecological conditions and food requirements of the region.
  • Contradicts the government’s commitments under the National Mission for Sustainable Agriculture
    • The National Mission for Sustainable Agriculture aims to make agriculture more productive, sustainable, remunerative and climate resilient by promoting location specific integrated/composite farming systems.
    • The palm oil mission recently launched by the Government, instead, aims at achieving complete transformation of the farming system of Northeast India.
  • Farmers becomes more vulnerable to global price shocks:
    • The increasing focus on palm oil will gradually result in focus shifting away from other traditional crops.
    • Studies shows that in case of variations in global palm oil prices, households dependent on palm oil cultivation in Southeast Asia become vulnerable – they manage to sustain themselves with help of proactive state intervention.
    • Therefore shift to palm oil cultivation in India >> may not be self-sustaining and makes local communities vulnerable and exposes them to external factors.
  • Health concern:
    • Oil palm requires high pesticide use in areas where it is not a native crop, leading to consumer health concerns as well.
  • Small landholding
    • Indian farmers generally have very small farm holdings which make investment in palm cultivation difficult.
  • Palm is invasive:
    • The palm is an invasive species that is not a natural forest product of North eastern India and its impact on the biodiversity as well as on soil conditions has to be analysed even if it is grown in non-forest areas.
    • Sri Lanka had recently stopped palm oil plantations because it became an invasive species, threatening native plants and animals.


  • National Mission on Edible Oil-Oil Palm (NMEO-OP)
    • The scheme basically aims at self-reliance in edible oil and has been allocated an outlay of Rs. 11, 040 crore over a five-year period.
    • Target:
      • The aim of the scheme is to raise the domestic production of palm oil by three times to 11.20 lakh tonnes by 2025-26 and to 28 lakh tonnes by 2029-30.
      • It is proposed to have an additional 6.5 lakh hectares for palm oil by 2025-26. The ultimate target is to reach 10 lakh hectares.
    • Special focus:
      • The scheme has a special focus on the Andaman and Nicobar Islands and the Northeastern region of India.
    • Price assurance:
      • Under this mission, farmers who opt for palm oil cultivation will receive price assurance from the government which will hedge the farmers from price volatility.
      • This is a Minimum Support Price-type mechanism and the government will fix this at 14.3 per cent of crude palm oil (CPO) price.
      • The scheme also has a sunset clause which is November 1, 2037.
      • This price assurance given to the farmers is called the Viability Price (VP).
        • VP is the annual average CPO price of the last 5 years adjusted with the wholesale price index to be multiplied by 14.3 %.
        • The deficiency price payment would be done through direct bank transfer to the farmers’ accounts.
  • Earlier measures to promote palm oil:
    • Technology Mission on Oilseeds & Pulses (TMOP)
      • In view of the importance and significance of oil palm cultivation, DAC&FW had taken up Technology Mission on Oilseeds & Pulses (TMOP) in 1991-92 in the potential states.
    • Oil Palm Development Programme (OPDP)
      • A comprehensive centrally sponsored scheme, Oil Palm Development Programme (OPDP) was taken up during VIII and IX Plan.
    • Integrated Scheme of Oilseeds, Pulses, Oil Palm and Maize (ISOPOM).
      • During X and XI Plan, Government of India provided support for oil palm cultivation under Integrated Scheme of Oilseeds, Pulses, Oil Palm and Maize (ISOPOM).
    • Special Programme on Oil Palm Area Expansion (OPAE) under RKVY
      • It aims to bring 60,000 ha area under Oil Palm cultivation, which continued till March, 2014.
    • National Mission on Oilseeds and Oil Palm (NMOOP)
      • During the XII Plan, National Mission on Oilseeds and Oil Palm (NMOOP) has been launched >> which is dedicated to oil palm area expansion and productivity increases.
      • In 2018, NMOOP was merged with National Food Security Mission.


  • Sustainable model of palm oil cultivation
    • As the palm oil industries mature in Indonesia and Malaysia, both countries have taken bold steps to ensure its sustainability.
    • Malaysia has put a cap on its land-use at 6.5 million hectares. Indonesia has declared a moratorium on new palm oil developments and is reviewing licenses that were issued previously to make sure their environmental impact is not overly heavy.
    • To prove the sustainability of their palm oil production, Malaysia and Indonesia have created mandatory certification schemes in the Malaysian Sustainable Palm Oil (MSPO) and Indonesian Sustainable Palm Oil (ISPO) respectively to meet the demands of their buyers.
    • The palm oil experience from Indonesia and Malaysia gives firm evidence that when it comes to producing an edible oil domestically, India will not have to choose between forex loss or forest loss.
  • Indian Palm Oil Sustainability (IPOS) Framework
    • The idea of IPOS is to create a set of social, economic, environmental and agronomic guidelines for palm oil production and trade.
    • It is an inclusive sustainability framework, which is made by the Indian industry for the Indian industry and provides them a guideline for promoting sustainable palm oil production and trade.


  • State support needed:
    • Two important constraints that impede area expansion programme under oil palm are the opportunity cost of land of farmers during a long gestation period of at least 3 years when no financial income flows to farmers and high cost of irrigation
    • Therefore farmers need to be nudged and incentivised to cultivate palm oil by compensating them for three years for their land against that potential loss and also give them one-time irrigation investment subsidy.
  • Introduce mandatory certification schemes:
    • There is a wealth of knowledge that India can tap into from the knowledge of the Malaysian Sustainable Palm Oil (MSPO) and Indonesian Sustainable Palm Oil (ISPO) to make its domestic palm oil production sustainable.
  • Focus on improving indigenous edible oil:
    • India should focus on improving indigenous edible oil production (mustard, groundnut etc.)rather than focusing on palm oil.
    • If subsidies and support are extended to oilseeds that are indigenous to India and suited for dryland agriculture, they can help achieve self-reliance without dependence on oil palm.
  • Need for effective taxation:
    • Farmers should be given duty protection from cheap imports, alongside cultivation incentives and price support.


Q. India’s push for oil palm cultivation to achieve self-sufficiency in vegetable oils is a step in the right direction. Critically analyse?