Indian state bets big on oil palm to cut vegetable oil imports by $19 billion

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  • Telangana will add 2 million acres of oil palm in 4 years
  • Telangana could become the world’s 5th largest oil palm producer
  • Subsidies and higher yields attract farmers to oil palm
  • Limited supply of seedlings limits oil palm expansion

SATHUPALY, India, Aug 3 (Reuters) – Pullarao Daravathu and thousands of other farmers in Telangana, southern India, are busy planting oil palms as their home state aims to add more area under controversial cultivation within four years than the whole country for decades.

Telangana is aiming for an additional 2 million acres for oil palm cultivation over the next four years and is working hard to achieve this goal – from building large dams and irrigation canals to importing millions germinated germs.

Generous government subsidies and the exceptional profit potential compared to other crops are also encouraging farmers like Daravathu to turn to oil palms.

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“Oil palm fetches more than 200,000 Indian rupees ($2,536) per acre to farmers who planted the crop a few years ago. In rice, I struggle to earn 40,000 rupees even after trying hard,” said Daravathu, who was planting oil palms on his 5-acre farm in Sathupally, nearly 300 km away ( 186 miles) east of Hyderabad, the state capital.

The recent rise in palm oil prices has more than doubled the prices of fresh fruit bunches, which farmers sell to oil mills.

For years, price volatility, water scarcity and a nearly four-year gestation period have limited oil palm plantation in India to less than a million acres, mostly on the coast of Andhra Pradesh, the state from which Telangana was carved out in 2014.

But Telangana, which occupies an inland region on the Deccan Plateau, now aims to become India’s main palm oil hub, with an area target that would put the state as the world’s fifth largest oil palm producer. – from a currently negligible base.

The campaign could reduce India’s gigantic vegetable oil imports, which cost the country a record $18.9 billion a year ago and widened the national trade deficit.

India meets two-thirds of its vegetable oil demand through imports of around 14 million tonnes per year, including around 8.5 million tonnes of palm oil.

The federal government is keen to increase palm oil production to reduce those costly imports, which have driven inflation this year to multi-year highs after Indonesia’s main supplier abruptly halted exports.

“In the next four years, most of the palm plantations would be completed, and after 7 to 8 years, Telangana could produce 4 million tonnes of palm oil,” L Venkatram Reddy, director of oil palm, told Reuters. horticulture to state government.

India currently produces less than 300,000 tonnes of palm oil and depends on imports from Indonesia, Malaysia and Thailand to meet its needs.

Even if Telangana manages to cultivate oil palms on just 1 million acres and produces 2 million tonnes of palm oil, it would be a huge achievement, said Chava Venkateswara Rao of Godrej Agrovet Ltd (GODE.NS), the country’s largest palm oil producer.

Until last year, the country was adding about 35,000 acres of oil palm every year.

WATER FIRST

Some areas of Telangana have enough water for thirsty oil palms thanks to rivers such as the Godavari, Krishna and Bhima. But many pockets lacked sufficient water to meet oil palm needs of up to 265 liters per tree per day.

To overcome this, the state built huge lift irrigation projects and a network of canals that now allow farmers to plant oil palms across most of the state.

“We used to face water scarcity in summer season. Now with Kaleshwaram lift irrigation project, we have enough water for oil palm,” the farmer said. Bollampalli Venkateshwar Rao, who planted oil palms on 12 acres.

The Kaleshwaram irrigation project, which is nearing completion, cost the state 1.15 trillion rupees ($14.44 billion).

Authorities only allow oil palm cultivation after farmers install water-saving micro-irrigation systems, Reddy said, adding that “subsidies from central and state government cover almost full cost of the drip irrigation system”.

Switching paddy rice and other crops to oil palm could help the state reduce annual paddy purchases by about 2.5 million tons and reduce the electricity bill of lift irrigation projects 15 billion rupees because drip oil palms need less water than paddy, says Reddy.

Ravi Mathur, who heads the Indian Institute of Oil Palm Research (IIOPR), a government-backed body spearheading the oil palm push, said the lift irrigation project has made possible planting of oil palms in areas previously unsuitable for cultivation due to water scarcity.

RARITY OF PLANTING MATERIAL

While thousands of farmers want to switch to oil palm, availability of seedlings is limited and preparing them is a lengthy process that takes almost a year.

Companies operating in Telangana imported 12.5 million sprouts last year and produced seedlings on around 200,000 acres this year, said an official with state-owned TS Oilfed, the largest importer of sprouts. from the country.

The state aims to import 15 million sprouts this year – mainly from Indonesia, Malaysia, Thailand and Costa Rica – and 50 million next year to meet the target, he said.

But only a few companies provide sprouts.

“There is a sudden increase in demand following a rise in palm oil prices. Companies are not able to supply as much as we need this year,” said Sougata Niyogi, a senior official at Godrej Agrovet. “The supply situation would become more comfortable next year.”

($1 = 78.8710 Indian rupees)

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Reporting by Rajendra Jadhav; edited by Gavin Maguire and Simon Cameron-Moore

Our standards: The Thomson Reuters Trust Principles.

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