Agriculture, GS-3, Uncategorized

Overseas investors continue to shun oil palm industry

The Hindu

Issue The government’s allowed 100 per cent foreign direct investment (FDI) in oil palm plantations last year but has failed to draw even a single investor.


  • India spends huge amount on imports of edible oil every year.
  • Attempts to increase the area under oilseeds in India have not been very successful, but demand has been rising perennially.
  • Palm oil imports constitute nearly 75 per cent of the total edible oil imports. Palm is generally the cheapest commodity vegetable oil and also the cheapest oil to produce and refine globally.
  • The Government of India has been trying, for many years now, to reduce its dependence on imported edible oils, by encouraging farmers to take up palm cultivation.
  • In 1992, the Oil Palm Development Programme (OPDP) was launched in six Indian States.
  • In 2004-05, the scheme was introduced in six more States, including north-east India — Mizoram, Tripura and Assam.
  • This was followed by an “Oil Palm Area Expansion” (OPAE) programme in 2011-12. But palm cultivation in the country has not really gained traction.
  • Indonesia and Malaysia are the two major palm oil producers globally, producing nearly 85 per cent of the global output.
  • The best growing conditions for palm trees exist in a small band around the equator, limiting the number of places the crop can be successfully farmed. These regions coincide with the rainforest zones.
  • More and more environmentalists are opposing the rapid expansion of palm plantations at the cost of rainforests in Indonesia and Malaysia. As a result, companies have been looking for other geographies to expand the plantation.

Constraints in Expansion

  • First and foremost, lack of large land tracts is a major constraint. The industry wants the government to declare palm oil as a plantation crop to move it out of the Land Ceiling Act. The current policies of the Centre do not allow companies to either acquire or lease land beyond a specific acreage as defined by land ceiling norms. Thus, there is no scope for the corporate sector for large scale plantation of oil palm.
  • A second limitation is the weather. Palm requires humid weather throughout the year. The harsh Indian summer impacts both crop development and yield. In hot summer months, the recommended irrigation is 300 litres per plant per day. This limits the regions where this crop can be grown.
  • A third constraint is the lack of infrastructure. Close proximity between farms and processing mills is a must. The fresh fruit bunches should be processed within 24 hours of harvest to obtain good quality oil. A delay leads to build-up of free fatty acids.
  • Last but not the least, there’s the lack of trained and experienced farmers who can successfully make money out of this crop.

More space

  • In order to encourage its cultivation in the country as a part of its effort to reduce imports and ensure edible oil security, the government came out with a National Mission on Oilseeds and Oil Palm (NMOOP).
  • NMOOP envisages bringing an additional 1.25 lakh hectares under oil palm cultivation through area expansion approach in the States including utilisation of wastelands. The States currently engaged in oil palm cultivation are Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Maharashtra, Mizoram, Karnataka, Kerala, Odisha, Tamil Nadu, Arunachal Pradesh, Assam, Bihar, Manipur, Meghalaya, Nagaland, Sikkim, Tripura and West Bengal.
  • Oil palm developers, however, say that the potential of this crop could be realised effectively if there is a separate oil palm development board, a separate import policy for palm oil and a separate budget for oil palm industry development besides relaxation of land ceiling norms.

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