India VegOil: NMEO-OP to Disburse $134 Million Over 5 Years
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FAS New Delhi (Post) projects India’s total Oilseed production in MY 2023/2024 (forecast year) at approximately 42.5 MMT, unchanged over the MY 2022/2023 (current year) estimate. This assessment is predicated on attaining typical crop yields due to good reservoir water storage, soil moisture levels, and sufficient farmer access to fertilizers. However, a late-arriving El Niño weather pattern could trigger reduced rainfall during the critical southwest monsoon (June-September) season.
Abnormal, heavy rainfall patterns from January-April 2023 in various Oilseed-producing states have led to reduced crop quality of rabi1 Oilseed crops, including rapeseed-mustard. Still, Post estimates Indian Oilseed plantings to remain steady at 42.6 million hectares (ha) in the forecast year, as Government interventions, including assurances of commodity procurement and the annual increase in the minimum support price (MSP), will help maintain high acreages, particularly in Soybeans, as farmers will shift away from less profitable crops.
Unstable weather patterns in India continued in February, where a month-long dry spell was followed by heavy rainfall in March, where certain regions recorded excess precipitation levels well above historical averages. On April 2, 2023, the India Meteorological Department forecasted that above-normal maximum temperatures are likely throughout India from April to June, which would stress kharif4 crops, including Soybean, sunflower seed, and peanut. A significant increase in biotic (pathogens, pests) and abiotic (temperature, weather) stresses in the current MY would lead to lower crop productivity.
Indian National Mission on Edible Oil-Oil Palm
To reduce edible Oil imports, the Modi Administration 2021 created the National Mission on Edible Oil-Oil Palm (NMEO-OP) with a financial outlay of INR 11.04 billion ($134 million)5 for five years. The program promotes Palm Oil cultivation through financial assistance by providing affordable seed stock to farmers for plantings and guaranteeing procurement through a fixed “viability price” issued for fresh fruit bunches (FFB). The Indian Government has stated it would compensate farmers through a “viability gap payment” during the production gap years and any FFB negative pricing through 2037.
The NMEO-OP policy emphasizes increased Oil Palm acreage in the northeastern states and the Andaman and Nicobar Islands, regions with rainfall and temperatures primarily suitable for Oil Palm cultivation. The Indian government envisages a potential production increase from its estimated 1.87 ha (fruiting area) of Oil Palm cultivation in MY 2020/2021. It brings an additional 650,000 ha online by 2025/2026, totaling one million ha of production.6 The program intends to increase crude Palm Oil (CPO) production to 1.12 MMT by MY 2025/2026 and 2.8 MMT by 2028/2029. According to the Indian government, NMEO-OP is implemented in 15 states and Union Territories.
Challenges that may limit the success of NMEO-OP program include the frequency of erratic weather patterns that call into question estimates of future water availability levels necessary for Oil Palm production, limited farmer acceptance of long-term NMEO-OP activities, and a lack of sufficient Oil Palm processing units in growing areas, especially in the northeastern states. In addition, recurring global CPO price volatility, environmental concerns related to expanding Oil Palm cultivation on forested lands, and general land scarcity for suitable plantation crop production may impede Oil Palm production in India.
Previous attempts to boost Palm Oil production in the northeastern and southern states occurred through initiatives such as the Oil Palm Development Program 1992 and an “Oil Palm Area Expansion” scheme in 2011, each leading to limited commercial opportunities and deforestation concerns. According to AgFlow data, India imported 0.18 million tons of Palm Oil from Indonesia in May 2023, followed by Malaysia (0.17 million tons). Total imports reached 0.8 million tons in Jan-May of this year.
Other sources: USDA
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