Monsoon’s increasing unpredictability is cause for concern
Excess rainfall after a long dry spell last year along with the hit to wheat yields from the sudden rise in temperatures after mid-March, was the clearest evidence of the challenges posed by climate change: To policymakers, breeders and, of course, farmers.
A sputtering start
• The southwest monsoon has had a sputtering start despite an onset three days ahead of schedule.
• All-India rainfall during June 1-19 has been 8 per cent below the normal average for this period.
• Even the regions covered by the monsoon have seen skewed precipitation.
• Rainfall has been 22 per cent deficient in South Peninsular India, while it is 50-134 per cent in excess in Arunachal Pradesh, Assam, Meghalaya, Sikkim and north Bengal.
Impact on Agriculture
• Floods and landslides at one end, and largely localised rains due to weak monsoon winds at the other, has meant that sowing of kharif crops (excluding sugarcane) is down 16 per cent over last year’s acreage at this time.
• That could make policymakers a tad nervous, especially given elevated food prices.
• Most projections of inflation and real GDP growth, including by the Reserve Bank of India, have been predicated on the assumption of a normal monsoon.
A slow start can be a blessing
• A slow start — the monsoon season extends from June to September, with nearly 62 per cent of the rainfall received during the two middle months — can even be a blessing.
• It gives additional time for the government and farm input companies to plan movement and placement of seeds, fertilisers and crop protection chemicals.
• This may matter more in today’s situation, where the Russia-Ukraine war and China’s Covid lockdowns have caused supply disruptions and delays in imports, including of fertilisers and agro-chemical intermediates.
• For now, all indicators — from La Niña to sustained high summer temperatures conducive for formation of a low-pressure system — point to a normal monsoon. Better late than never, as the saying goes.
Cause for Concern
• The monsoon’s increasing unpredictability — not just delays and breaks, but also fewer rainy days and more extreme precipitation — is cause for concern.
• Last year, when surplus rains in June led to brisk sowings. But this was followed by a long dry spell from the second week of July to the third week of August and, then, excess rainfall in the subsequent five months till January.
• The kharif crop, then, suffered both moisture stress during the vegetative growth stage and inundation at harvesting time.
• Along with the hit to wheat yields from the sudden rise in temperatures after mid-March, was the clearest evidence of the challenges posed by climate change: To policymakers, breeders and, of course, farmers.
An oil palm plan for home
Context
Supply disruptions during the pandemic and the Russia-Ukraine war have led many nations to think about “self-sufficiency” in critical food items or at least reduce their “excessive dependence” on imports of essential food products.
India’s import dependence for edible oil
• India imports 55 to 60 per cent of its edible oil requirements.
• India’s edible oil import bill in 2021-22 (FY22) crossed $19 billion (for more than 14 MMT of imports).
• Palm oil comprises more than 50 per cent of India’s edible oil imports, followed by soybean and sunflower.
• Atmanirbharta in edible oil: The “excessive dependence” on imports has raised the pitch for “atmanirbharta” in edible oil.
• The Prime Minister launched the National Edible Oil Mission-Oil Palm (NEOM-OP) in 2021.
Self-reliance Vs Self-sufficiency
• “Self-sufficiency” and “self-reliance” are two different concepts with very different policy implications.
• What is self-sufficiency? Self-sufficiency would imply replacing all imports of a commodity (say edible oils in India’s case) at any cost (thus raising import duties exorbitantly).
• What is self-reliance? Self-reliance would continue to embed the principle of “comparative advantage” in the endeavour to reduce dependence on imports.
• Case of India’s agriculture: The country’s agri-exports in FY22 touched $ 50.3 billion against its
Back To Basics:
National Mission on Edible Oil-Oil Palm (NMEO-OP):
• NMEO-OP is a Centrally Sponsored Scheme. It is proposed to have an additional 6.5 lakh hectares for palm oil by 2025-26.
• It will involve raising the area under oil palm cultivation to 10 lakh hectares by 2025-26 and 16.7 lakh hectares by 2029-30.
• Oil palm farmers will be provided financial assistance and will get remuneration under a price and viability formula.
• The Viability Formula is a Minimum Support Price-type mechanism and the government will fix this at 14.3% of Crude Palm Oil (CPO) price.
o It will eventually go up to 15.3%.
• The special emphasis of the scheme will be in India’s North-Eastern (NE) states and the Andaman and Nicobar Islands due to the conducive weather conditions in the regions.
agri-imports of $ 32.4 billion.
• This means that Indian agriculture is largely globally competitive.
• But its biggest agri-import item, edible oil, accounts for 59 per cent of India’s agri-import basket.
Why Oil palm?
• Achieving atmanirbharta in edible oils through traditional oilseeds such as mustard, groundnuts and soya would require an additional area of about 39 million hectares under oilseeds.
• About four tonnes of oil per hectare, which is more than 10 times mustard can give at existing yields.
Challenges
• Long gestation period: It takes four to six years to come to maturity; during this period, smallholders need to be fully supported.
• Pricing formula: Further, the pricing formula of fresh fruit bunches (FFB) for farmers has to be dovetailed with a likely long-run average landed price of crude palm oil with due flexibility in the import duty structure.
• Appropriate import duty: One needs to identify trigger points when import duties need to be raised as global prices come down, and when to reduce these duties in case of rising global prices.
• Oil recovery: Besides this, the processing industry needs to ensure an oil recovery of at least 18 to 20 per cent – that must be built into the pricing formula.
• Danger to food security: Such a large tract of land will not be available without cutting down the area under key staples (cereals) – this could endanger the country’s food security even more.
Way forward
• Develop oil palm: Given the way international prices of edible oils have surged in the last year or so (by more than 70 per cent), it may be time for India to ramp up its efforts in developing oil palm.
• Declare oil palm as a plantation crop: The other option is to declare oil palm as a plantation crop and allow the corporate players to own/lease land on a long-term basis to develop their own plantations and processing units.
• Providing support: The support (subsidy) could be the opportunity cost of their lands, say profits from paddy cultivation, which is largely the crop oil palm will replace in coastal and upland areas of Andhra, Telangana and Northeast India.
• Reduce import dependence: A rational policy option to reduce import dependence in edible oils is to develop oil palm at home and ensure that it gives productivity comparable to that in Indonesia and Malaysia.
Conclusion
Overall, unless India thinks holistically and adopts a long-term vision, the chances of reducing India’s imports of edible oils from 14MMT in FY22 to 7MMT by FY27 look bleak.