Wake-Up Call: NITI Aayog Pushes For Higher Import Duties To Revive India's Edible Oil Economy

In a bold move to secure India's edible oil economy, NITI Aayog's latest report advocates for increased import duties on these oils, aiming to reduce the country's heavy reliance on imports.

Titled ‘Pathways and Strategy for Accelerating Growth in Edible Oil Towards Goal of Atmanirbharta,’ the report highlights a concerning reality — 55-60 per cent of India's edible oil needs are met through imports — a growing threat to food security and economic stability.

However, the mid-1990s saw a surge in demand for edible oils, driven by cheaper imports due to globalisation and rapid economic growth, leading to a sharp increase in per capita consumption. This, in turn, created a growing dependence on imports to meet domestic needs.

To illustrate the shift, while edible oil consumption soared from 5.34 million tonnes (MT) in 1986-87 to an astounding 25.84 MT in 2021-22, domestic production, though increasing from 3.87 MT to 11.65 MT over the same period, has not kept pace with demand.

This widening gap has resulted in imports swelling to 16.5 MT, positioning India as the world’s largest importer of vegetable oils. This dependency is straining the country’s foreign exchange reserves by $20.56 billion, underscoring the urgent need for self-sufficiency in edible oil production through the promotion of oilseeds and palm oil.

The stakes extend beyond economics, with geopolitical implications as well, as India's edible oil trade influences its relationships with key partners like Malaysia.

For palm oil, Indonesia (62 per cent) and Malaysia (32 per cent) are the dominant suppliers, while soybean oil imports are predominantly from Argentina (75 per cent) and Brazil (14 per cent).

This reliance on a limited number of source countries exposes India to risks associated with geopolitical instability, weather disruptions, and price fluctuations in these regions.

“A flexible tariff structure, responsive to global market prices, domestic supply and demand trends, and the minimum support price for oilseeds, offers a strategic approach,” the Aayog said as it proposes a dynamic trade policy for balanced growth of the sector.

“Implementing a higher import duty regime can safeguard domestic production, while a substantial duty gap between crude and refined oil will benefit processing industries,” it said.

“Aligning support prices with the import duty structure will support farmers, processors, and consumers alike,” it added.