India's protesting farmers hold key to self-reliance in edible oils

Indian farmer Shingara Singh has grown grain for 35 years and is one of the thousands of protesters against agricultural reforms who have the power to help slash a huge annual bill of $10 billion for imports of vegetable oils.

But Singh, 55, says he will only switch to growing oilseeds, such as rapeseed and sunflower, on his 15-acre (six-hectare) plot in the northern state of Punjab, if the government promises guaranteed rates for his produce.

"Sometimes we grow sunflower, but we don't get to sell it at the MSP," said Singh, 55, referring to the Minimum Support Price (MSP) the government pays for his rice and wheat.

"In fact, we often have to sell sunflower at deep discounts," added the blue-turbanned Singh, a participant in the farmers' daily sit-ins on the edge of the capital, New Delhi.

Such a switch by farmers in the breadbasket states of Punjab and Haryana could cut shipments of edible oils that have tripled over the last two decades to rack up India's third-biggest import bill, after crude oil and gold.

That would also melt bulging inventories of rice and wheat worth billions of dollars that lie unsold in government warehouses, after years of bountiful harvests.

Graphic: India rice and wheat stocks

But industry experts say grain growers are unlikely to make the switch in large numbers unless the government offers financial assistance.

"Farmers will shift to oilseeds if the government agrees to give incentives of a few thousand rupees per acre for diversification, which is necessary," said veteran trader Govindbhai Patel, the head of G.G. Patel & Nikhil Research Co.

Such a move looks unlikely during the stand-off over three new farm laws adopted by Prime Minister Narendra Modi's government in September, which protesting cultivators call a ruse to abandon MSPs.

These prices are set for more than 20 crops each year, but state buying agency the Food Corporation of India (FCI) applies them only to purchases of rice and wheat, blaming a lack of funds and storage space.

Only the prospect of financial support will encourage farmers to switch from grain crops, with their government-set prices, to the less predictable gains of oilseeds.

"We've requested the government to give that kind of support to farmers," said B. V. Mehta of industry body the Solvent Extractors Association of India (SEA).

The government, which earns 350 billion rupees ($4.77 billion) from levies on edible oil imports, can easily set aside 40 billion rupees a year for crop diversification, through more taxes on such imports, Mehta added.

Higher output of oilseeds and fewer imports of oils will boost farmers' incomes, create jobs in the domestic crushing industry and help save precious foreign exchange, he said.

The growers' transition away from grain is a key step in a government plan to boost oilseed production, said a senior government official, who sought anonymity in line with policy.

Once the government resolves the farmers' month-old agitation, it can chalk out financial incentives to drive crop diversification, industry officials say. Negotiators for both sides are to meet on Jan. 4 to try and break the deadlock.

GRAIN PREFERRED TO OILSEEDS

Government purchases initially meant to promote self-sufficiency in domestic staples, have spurred farmers, especially those with access to better irrigation, to favour grain over the years, rather than oilseeds and pulses.

Graphic: India wheat and rice output

That has pushed India to the rank of the world's second-biggest producer of rice and wheat but caused a glut. At the same time, lower oilseed output has made it the world's biggest importer of oils, to meet nearly 70% of consumption.

Such imports have surged to 15 million tonnes from 4 million two decades ago and could touch 20 million by 2030, boosted by a growing populace with higher incomes to satisfy a penchant for calorie-laden curry and deep-fried food.

India buys palm oil from Indonesia and Malaysia and soyoil and sunflower oil from Argentina, Brazil, Russia and Ukraine.

Graphic: India's rising edible oil imports

Oilseeds are now mainly grown in rain-fed areas with low crop yields, but Punjab, with efficient irrigation, can expect higher yields, experts say.

Farmers in the state and neighbouring Haryana can produce 6 million tonnes of rapeseed if they divert half the area now under wheat, bringing a domestic supply boost of 2.5 million tonnes, Mehta estimated.

Farm economists say India should create a transition fund.

"Both central and state governments should work out a financial package that will get this crop diversification rolling," said former government adviser Ashok Gulati.

($1=73.34 rupees)