palm oil

The Union Cabinet, chaired by Prime Minister Shri Narendra Modi recently gave his approval to launch a new Mission on Oil palm which will be known as the National Mission on Edible Oils – Oil Palm (NMEO-OP). It is supposed to be the new Centrally Sponsored Scheme with a special emphasis on the Andaman and Nicobar Islands and North-East region. The proposed scheme of the government of India will subsume the National Food Security Mission-Oil Palm program.

Importance of the scheme

  • to reduce the heavy dependence on imports of edible oils,
  • efforts are being made to increase the domestic production of edible oils,
  • to focus on increasing the area and productivity of oil palm and oilseeds.

Advantages of the scheme

The scheme will greatly benefit:

  • the oil palm farmers,
  • create employment generation,
  • increase capital investment,
  • shall reduce the import dependence and also
  • increase the income of the farmers.

The backdrop of the scheme: Since 1991-92, the Government of India has made a lot of efforts to increase the production of oil palm and oilseeds. With our relentless efforts, we could increase the production of oilseeds from 275 lakh tons in 2014-15 to 365.65 lakh tons in 2020-21.  To assess the potential of palm oil production in India, the Indian Institute of Oil Palm Research (IIOPR) for the cultivation of oil palm in the year 2020 had made an assessment that India has the potential of palm oil production in around 28 lakh ha.  Therefore, there is a huge potential in the oil palm plantation and subsequently in the production of Crude Palm Oil (CPO) in the country.

Current situation of palm oil production:

Presently, 3.70 lakh hectares of land in the country are under Oil Palm cultivation. Oil palm produces around 10 to 46 times more oil per hectare than the other oilseed crops and it has a yield of 4 tons of oil per hectare. Therefore, it has great potential for cultivation. Even today around 98% of CPO is being imported; the proposed scheme is expected to increase the area and production of CPO in India. 

Financial Outlay of the scheme

The financial outlay of the scheme is Rs.11, 040 crores, out of which Rs.8, 844 crore is the share of the central government and Rs.2, 196 crore is the share of the state government and this also includes the viability gap funding.

The target of the scheme

  • The scheme is proposed to cover an additional area of 6.5 lakh hectares (ha.) for oil palm production till the year 2025-26 and thereby reach the target of 10 lakh hectares. 
  • The production of Crude Palm Oil (CPO) in the country is expected to increase to 11.20 lakh tonnes by the year 2025-26 and up to 28 lakh tonnes by the year 2029-30.

Focus areas of the scheme:

  • The oil palm farmers in India cultivate Fresh Fruit Bunches (FFBs) and from which oil is extracted by the industry. In spite of all the hard work, the prices of these FFBs are quite volatile and are linked to the international Crude Palm Oil prices fluctuations.
  • In order to help the farmers from uncertainty, the Government of India for the first time will give a price assurance to the oil palm farmers for the FFBs cultivation, just to inculcate confidence in the Indian oil palm farmers to go for the increased area and therefore more production of palm oil. This price assurance will be known as the Viability Price (VP).  
  • This Viability Price will protect the farmers from the fluctuations of the international CPO prices and protect them from the volatility.  
  • The Viability Price shall be the annual average of the Crude Palm Oil price of the last 5 years adjusted with the wholesale price index to be multiplied by 14.3 %.  Viability Price shall be fixed yearly from 1st November to 31st October for the oil palm year.
  • A Formula price (FP) will also be fixed and it will be 14.3% of CPO and it shall be fixed on a monthly basis.
  • The viability gap funding will be the Viability Price-Formula Price, and if needed, it would be directly paid to the farmer’s accounts in the form of DBT.
  • By the viability gap funding the industry will be mandated to pay 14.3% of the CPO price which will eventually go up to 15.3%. 
  • There is also a sunset clause for this scheme which is 1st November 2037. 
  • To give impetus to the North-East states and Andaman region, the Government shall bear an additional cost of 2% of the Crude Palm Oil price to ensure that the farmers are paid at par with the rest of India. 
  • The states will have to enter into MoUs with the Central Government to reap the benefits from the viability gap payment, which is proposed in the scheme.
  • Another focus of the scheme would be to substantially increase the assistance of interventions/ inputs. 
  • A substantial increase has been made for the maintenance and inter-cropping interventions.
  • An increase is being made for planting material for oil palm and this has been increased from Rs.12,000 per ha to  Rs.29000 per hectare.
  • Special assistance of Rs 250 per plant is being given to replant and rejuvenation the old gardens.
  • To address the issue of shortage of planting material in the country, assistance up to Rs.80 lakhs for 15 ha. in the rest of India and Rs.100 lakhs for 15 ha in North-East and Andaman regions shall be given.
  • Assistance for seed gardens shall be Rs.40 lakhs, Rs.50 lakhs for the rest of India and North-East & Andaman regions respectively.
  • Special assistance shall be given to the North-East and the Andaman regions in which special provisions are being made for half-moon terrace cultivation, land clearance, and bio fencing along with integrated farming. 

#National Farmer’s Day, October 12

# Port Blair-Capital of Andaman and Nicobar Islands


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