Why Amul’s Foray Into Edible Oil Business Is Significant For Indian Economy, Oilseed Farmers

Amul, India’s largest cooperative body, yesterday (9 July) said it will enter the edible oil business in the country by launching a new brand 'Janmay'.

'Janmay', which means fresh or newly-born, will see Amul selling five variants — cottonseed, mustard, sunflower, groundnut, and soybean oils — under the brand across 30,000 stores in Gujarat and Rajasthan tapping its parlours and retail counters.

Amul managing director R S Sodhi told the media that 'Janmay' has been launched with the objective of providing remunerative prices to oilseed farmers in Gujarat.

More importantly, it is a move to complement the Narendra Modi government’s plans to being atmanirbhar or self-sufficient in domestic oilseeds production.

Marketing edible oil is nothing new for the world’s biggest cooperative firm since it had sold Dhara brand edible oils in the 1990s. The Dhara brand is alive even today and is more popular for its jalebi advertisement.

Helping Amul in this attempt will be one of its key associates, the Palanpur-based Banaskantha District Cooperative Milk Producers Union.

The producers union will process 200 tonnes of oilseeds every day. The oil will be packaged at Amul’s new modernised plant near Panalpur, in northern Gujarat.

The Banaskantha Milk Producers Union has already bought mustard and groundnut this year through its farmers' networks. It will purchase more of other oilseeds going forward this season, according to Sodhi.

Amul’s foray into edible oils production and marketing is a crucial move complementing the Centre’s “Atmanirbhar Bharat Abhiyan” for four reasons.

One, oilseeds such as groundnut and mustard, which are grown in the country, make up about 25 per cent of the total consumption in the country. Cottonseed oil is consumed in states such as Gujarat.

Though India grows sunflower and soybean, a significant volume of edible oil produced from these crops is imported. Imports make up 65 per cent of total edible oils consumed in the country with palm group of oils enjoying a major share.

One of the objectives of Amul to get into edible oil business is that many of its 36 lakh member-farmers also cultivate oilseeds. Thus, this initiative will provide the member-farmers with a stable additional income and good remuneration, particularly in Gujarat.

This will ensure that the oilseeds farmers will not only reap the benefit of rising demand for edible oils in the country but also grow more to earn more.

Two, India is importing about 15 million tonnes (mt) of edible oils annually. Imports are rising every year by an average of 3 per cent. Palm group of oils, imported from Malaysia and Indonesia, make up over 60 per cent of these imports.

Rising population and increasing affordability are the factors driving edible oil demand. As a result of this, India spends Rs 75,000 crore of its foreign exchange in edible oils import.

Edible oils are among the top five imports on which a considerable amount of foreign exchange is spent.

The imports are actually affecting Indian oilseed farmers as some consignments are brought in clandestinely through the free trade agreement routes. Also, Indian consumers are paying for the development of the exporting countries by way of export tax.

Countries such as Malaysia and Indonesia tax export of crude palm oil in order to encourage their refining industries. This affects Indian edible oil refining units while impacting better return to farmers.

In these circumstances, India should encourage its farmers to grow more oilseeds so that it can lower its foreign exchange outgo, while also cutting down its reliance on other sources to meet its demand.

Dr B K Singh, director BKC Aggregator and BKC Weather System, told Swarajya that the Centre should consider providing cash incentives to farmers to shift from food crop to oilseeds.

“Farmers in Punjab and Haryana should be provided cash incentives to shift from rice to oilseeds,” he said.

Amul’s move should be seen in this direction since it is also a farmer-welfare organisation.

Three, it is necessary to make the country self-sufficient in oilseeds as it would rectify an error of judgement made by the country some 25 years ago.

India liberalised edible oil imports in the 1990s that affected domestic producers badly. The liberalisation came at a time when its domestic production met 90 per cent of the country’s demand.

The policy only encouraged cheaper imports, thus affecting Indian farmers as well as domestic refiners.

At that time, the excuse for liberalising edible oil imports was that they can be distributed through rations shops. Under this scheme, consumers were left holding cheaper palm oil.

Business experts don’t rule out “extraneous” reasons for such a move to liberalise edible oil imports.

Four, Amul’s foray will be a pioneering effort in creating aggregators of farmers’ produce, especially after the Narendra Modi government has introduced agricultural reforms.

Under the “one country, one market” policy that allows farmers to sell their produce to any buyer of their choice, aggregators of farm produce will stand a good chance if they offer the best prices to the growers.

Aggregators, including farmers and producers organisations, are necessary since they can accumulate the produce of small farmers and help them get better prices.

Amul can be such a sort of aggregator who can purchase from even small farmers and process them for sale as a value-added product.

There is also an additional benefit for Amul from this as well as its members. The crushed oilseeds will result in a de-oiled cake being produced as a byproduct.

This can be either given back to the farmers for feeding their cattle, sold to other poultry and dairy farmers or firms and even be looked at for export options.

These are early days but Amul’s baby steps is a welcome sign that promises a real boost for rural economy and, in turn, for the country.