Special Presentation Overview of Indian Oilseed...

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Special Presentation

Overview of Indian Oilseed Sector

Outlook for India’s Edible Oil Sector,

Issues & Challenges

By:

Mr. B.V.Mehta

National Council of Applied Economic Research (NCAER)

The Solvent Extractors’ Association of India (SEA)

15th March 2013, Delhi

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SEA Profile

• Formed in 1963 to foster the development & growth of the Solvent Extraction Industry in India

• Largest and Premier Association in the Vegetable Oil Sector in India

• First Association in Vegetable Oil & Oilseed sector to receive ISO 9001 Certification in India (2004)

• Recognised as NGO and TPO by Government of India

Over 850 Members

• S. E. Units • Oil Millers • Refiners

. Vanaspati Mnfrs.

. Importers

. Exporters

. Surveyors

. Shipping Agents

. Fin. institutes

. Foreign Buyers &

many more….

India

33

32

87

49

291

104 43

9

22

28

50

2

2

8

1

18

29 6

3

SEA Members

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Indian Oilseed Sector

Demand - Supply

and

Import of Vegetable Oils

5

• Area Under Oilseed Cultivation 26-27 Mn. Ha.

• Average yield 1100 Kgs.

• Output of 9 cultivated Oilseeds 29.8 Mn. T.

• Output of Cottonseed & Copra 11.0 Mn. T.

Total 40.8 Mn. T.

• Production of Vegetable Oils 7.45 Mn. T.

• Demand of Veg. Oils (Edible) 17 .5 Mn.T.

• Import of Veg. Oil 2012-13 (Nov-Oct) (Edible) 10.5 Mn.T.(E)

• Per capita consumption (2011) 14.3 Kg.

• Per capita consumption is rising by 3 to 4% per annum.

Oilseed Sector 2012-13

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Oilseed Sector - Share of India

• Vegetable Oil Sector Turnover Rs.125,000Cr

(US$ 23.0 bn.)

• Import & Export from Oilseed Sector Rs.65,000 Cr.

(US$ 12.0 bn.)

2011-12

• In World's Oilseed Production 8.0 %

• In World's Oilmeal Production 6.8 %

• In World's Oilmeal Export 6.5 %

• In World's Production of Veg. Oils 5.2 %

• In World’s Vegetable Oil Import 13.6 %

• In World's Edible Oil Consumption 10.2 %

Source: OIL WORLD

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Year

(Nov-Oct)

Oilseeds

Production Availability of Veg. Oils

Edible Non-

Edible

Total

2012-13 (E) 29.46 6.8 0.65 7.45

2011-12 29.80 7.34 0.78 8.12

2010-11 32.48 7.92 0.60 8.52

2009-10 24.88 7.26 0.51 7.77

2008-09 27.72 7.71 0.50 8.21

2007-08 29.76 7.75 0.49 8.24

2006-07 24.29 7.33 0.43 7.76

2005-06 27.98 7.56 0.47 8.03

2004-05 24.35 7.16 0.43 7.59

2003-04 25.18 7.21 0.38 7.59

India’s Oilseeds & Veg. Oil Production

Qty in Mnt

Source : SEA & Ministry of Agriculture

The average avaibility of vegetable oil is 7.9 Mnt only

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Palm Oil

Soya Oil

Sunflower Oil

Cottonseed

Groundnut

Other Oil & Fats

Rapeseed Oil

World & India Production of Oils & Fats 2012-13

Oil & Fats World India

Palm Oil 54.90 0.08

Soya Oil 43.54 1.76

Rape Oil 23.69 2.01

Sun Oil 14.70 0.21

Cottonseed Oil 4.89 1.13

Groundnut Oil 4.21 0.12

Other Oils & Fats 42.79 2.14

TOTAL 188.72 7.45

Qty : Mn T

Source: World data from Oilworld 2012 & SEA Data Bank for India

WORLD

Major Veg.Oils produced in India are Rapeseed Oil, Soybean oil, Cottonseed Oil, Rice Bran Oil & Groundnut Oil India’s contribution towards world Oil production is just 4%

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Country 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07

EU-27 59.4 60.3 61.6 60.0 57.4 56.4

U.S.A. 54.7 52.5 50.4 51.3 54.9 54.0

Argentina 92.1 77.7 63.0 46.4 35.7 24.8

China 25.1 24.5 23.8 22.9 21.8 21.3

India 14.8 14.5 14.3 13.9 12.5 12.1

Indonesia 33.4 29.7 25.6 23.5 21.9 19.8

Japan 21.5 21.4 21.5 20.8 22.2 22.3

Pakistan 21.5 21.5 21.7 21.6 21.5 21.3

Turkey 29.6 29.0 28.7 27.2 31.3 31.5

World 25.91 25.31 24.68 23.92 23.43 22.78

Source : Oil World 2012

Per Capita (kg) Disappearance of Oils and Fats in Selected Countries and World

Number shown includes consumption of oils and fats for Bioenergy

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Item Description

WTO

Bound

Rate

Duty on

Crude Edible

Oils

Duty on

Refined Edible Oils

Tariff Value

US$/MT (1st March 2013)

Soybean Oil 45% 2.5% 7.5% 1202(Crude)

RBD Palmolein 300% - 7.5% 914

RBD Palm Oil 300% - 7.5% 894

Crude Palm Oil 300% 2.5% 7.5% 849

Sunflower Oil 300% - 7.5% -

Rape/Mustard Oil 75% 2.5% 7.5% -

India – WTO Bound Rates & Import Duty 2013

Import duty on Crude Oil raised from Nil to 2.5% w.e.f.17th Jan 2013

Import Duty on Crude & Refined Palm Oil

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Period Crude Palm Oil

Refined Palm Oil

1994 (April) - 65.0

2001 (Apr.) 75.0 92.2

2006 (28, Feb) 88.8 99.4

2008 (20, Mar.) 20.60 28.33

2012 (10, Oct.) Nil 7.73

2013 (23, Jan.) 2.50 7.73

Import & Export from Oilseed Sector

• Import of Edible Oils freely allowed

9.98Mnt(11-12) Rs.56,000 Crores

(PalmOil:7.66mnt,SFO:1.13mnt, SBO:1.08mnt)

• Oilmeal Export freely allowed

5.5 mnt (11-12) Rs.8500 Crores

(Soybean Meal 4.0 Mnt, Rapeseed Meal 1.25 mnt)

• Oilseeds Export freely allowed

1.25Mnt (11-12) Rs.8200 Crores

(Seaseme Seed 0.40 Mnt, HPS Groundnut 0.85 Mnt)

• Exports of Castor Oil & derivatives Freely allowed

400,000 tonnes valued Rs.4000 Crores

• Export of Edible Oils in consumer packs freely allowed – Bulk banned

20,000 tonnes valued Rs.150 Crores

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Government of India’s Fiscal Incentive for Oilseed Cultivation

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In mid 1990’s MSP level for food grains were raised more than

for oilseeds. As a result, increasingly favorable returns from rice

and wheat have drawn area away from oilseeds, lowering

oilseed production.

Since 1998-99, however, the MSP of the major edible oilseeds

have been moving upward more decisively, intending to lure

the growers towards the oilseed crops.

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% Change

Commodity 2001-02 2005-06 2008-09 2012-13 In last Twelve Years

Grain Wheat 620 650 1080 1285 665 (107%)

Paddy 530 570 850 1250 720 (136%)

Maize 485 540 840 1175 690 (142%)

Oilseeds

Soybean Yellow 885 1010 1390 2240 1355 (153%)

Groundnut in shell 1340 1520 2100 3700 2360 (176%)

Rapeseed/Mustard 1300 1715 1830 2500 1200 (92%)

Sunflower seed 1185 1500 2215 3700 2515 (212%)

Sesamum 1400 1550 2750 4200 2800 (200%)

Safflower 1300 1565 1650 2500 1200 (92%)

MinimumSupport Price (MSP) of Agricultural Commodities

MSP for 2013-14 for Rapeseed is raised to Rs.3000/- and for Safflower to Rs.2800/-

Consumption

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North India

Population 23.9%

Consumption 22.6%

East India

Population 29.1%

Consumption 23.3%

South India

Population 20.9%

Consumption 21.3%

West India

Population 26.1%

Consumption 32.8%

(2010-11 Figures)

Zone wise Consumption Pattern

16 Source: GGN Research

(2010-11)

West India (Gujarat, Maharashtra, Rajasthan & M.P)

7%

6%

37%

25%

25%

Mustard Oil

Sunflower Oil

Palm Oil

Soybean Oil

Others

Western India is the most prosperous region of India having the highest per capita consumption of edible oil. Acceptability of Palm oil has improved and it has nearly 35% share. But even with 35% share this region is the second highest consumer of Palm oil on account of high per capita consumption.

MP and Maharashtra are the highest Soy oil consuming region as the major domestic Soybean crop is grown and there is a good house hold demand

The Mustard oil consumption is 9% which is majorly in Rajasthan.

Gujarat has switched to cottonseed oil from traditionally groundnut oil. 17

Source: GGN Research

(2010-11)

North India (Delhi, Punjab, J&K, H.P & U.P)

North India was traditionally a Mustard oil & Groundnut oil market but, has partially shift to Soy oil for house hold consumption and palm oil for out of home consumption(HORECA). This market is a perfect mix bag of all oils. It has the lowest share in percentage terms of Palm oil as it is the colder region of India.

25%

5%

30%

18%

22%

Mustard Oil

Sunflower Oil

Palm Oil

Soybean Oil

Others


(2010-11)

South India (Karnataka, Tamil Nadu, A.P,Kerala, Goa)

18%

70%

5%

7%

Sunflower Oil

Palm Oil

Soybean Oil

Others

The highest consumer of Palm oil both in absolute and percentage terms. It is also the biggest market for sun oil in India. There is a small share of soya oil and very low other oil consumption


(2010-11)

East India (West Bengal, Orissa, Bihar, Assam,C.G.,Jharkhand)

29%

40%

6%

25%

Mustard Oil

Palm Oil

Soybean Oil

Others

East India is the lowest per capita consuming region due to lower income levels. This has 40 % share of Palm Oil, but this is the second region after south where broadly the whole of the region has accepted Palm oil in the house hold. East India is the biggest market of Mustard oil(29% share).


• Major Oil consumed in India - Palm, Soya & Rape

• Lower & Middle Class Price Sensitive

• Palm Oil preferred Oil being cheapest

• Vegetable Oil Demand quite Elastic and switchable

Consumption & Characteristics of Indian Consumer

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Consumption of various oils in India in 2011-12

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Oils Domestic Import Total %

Palm Oil 0.07 7.67 7.74 46.0

Soybean Oil 1.65 1.08 2.73 16.2

Rapeseed Oil 1.74 0.09 1.83 11.1

Sunflower Oil 0.22 1.08 1.30 7.9

Cottonseed Oil 1.19 - 1.19 7.2

Rice Bran Oil 0.85 - 0.85 5.2

Groundnut Oil 0.39 - 0.39 2.4

Other 0.65 0.06 0.65 4.0

TOTAL 6.75 9.98 16.68 100

Qty: in MnT

Consumption Of Edible Oils In India

Demand Scenario upto 2020 Due to high growth in income levels, increasing trend in spending & better

living standards; India promises to continue high growth in consumption of edible oils and consumption may reach 23 ml T by 2020 @ 3% growth rate.

15,7 16,7 17,44 18,08

19 19,65 20,48 21,28 22,27 23,1

Consumption in Mnt

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Import of Vegetable Oils by India

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25

Edible, Vanaspati & Non-edible

2006-07 To 2011-12 (Nov – Oct)

Vegetable Oils

2011-12

2010-11

2009-10 2008-09 2007-08 2006-07

Edible Oils 9.98 8.37 8.82 8.18 5.61 4.71

Vanaspati (Hydrogenated Fat)

-- -- -- 0.02 0.05 0.25

Non-edible 0.21 0.29 0.42 0.46 0.65 0.63

Total 10.1 8.66 9.24 8.66 6.31 5.59

Import of Vegetable Oils

Source : SEA

(Qty in Mn T)

Import of Veg Oils is rising from year to year to bridge the demand and supply gap

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Countries Jan/Dec 2012

Jan/Dec 2011

Jan/Dec 2010

Indonesia 5301 5011 5435

Malaysia 2494 1677 1189

Singapore - - 2

Thailand 4 49 21

Others 10 - 1

Total 7809 6745 6648

Import of Palm Oil by India

Qty in ‘000 Tonnes

Source: Oil World

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Jan/Dec 2011

Jan/Dec 2010

Russia 23 10 26

Ukraine 1055 818 588

USA - - 11

Argentina 37 43 37

Others 1 1

Total 1116 871 663

Import of Sunflower Oil by India


Source: Oil World

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Jan/Dec 2011

Jan/Dec 2010

USA 18 - 161

Argentina 817 746 1284

Brazil 313 144 78

Paraguay - 36 45

Thailand - 8 -

Others 32 6.8 -

Total 1180 941 1568

Import of Soybean Oil by India


Source: Oil World

Figures in Mln.Tn

Stagnant Domestic oil production is leading to higher imports YOY to feed the growing Indian demand.

India’s Vegetable Oil Production & Imports

5,75 6,72

5,12

7,59 7,59

8,03 7,76

8,24 8,21 7,77

8,52 8,12

7,45

5,09 4,76

5,39

4,63

5,45 5,13 5,34 6,26

8,64 9,24 8,66 10 10,5

Import

DomesticProduction

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In last 3 years, Import dependence has increased much more due to rising

consumption and stagnant domestic production.

India's Growing Dependence on Imports

53%

59%

49%

62% 58% 61% 59% 57%

49% 46%

50% 57%

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• Low Productivity

• Small farm sizes

• Lack of varietal replacement

• Shifting of acreage from Oilseed to other crops

• Losses due to pests and diseases

• Vagaries of nature

Major Constrains in Domestic Production of Oilseeds

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What are the Prospects for Indigenous Supplies of Oils in India ?

• Oilseed output targeted by 4% per year

• Veg. Oil Production increase – 350/400Thousand per year

• Demand to rise Faster @ 700 to 800 thousand per year

• Oil Palm yet to pick up

Demand drivers in India

• Consistent GDP growth rate at about 7% in last 5 years

• The big emerging Indian middle class.

• Urbanisation

• Nucleus Family

• Change in Food Habits

• The double digit growth of out of home consumption of edible oils.

• Per capita consumption of Edible oils in India at 14.3 kg (2012) which

is still a lot below threshold level of consumption.

• Even with a moderate population growth, the absolute increase in

number of people is quiet High.

India has a Promising Demand Growth

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Governments Support

• Scheme like NREGA (National Rural Employment Guarantee Act) and rising labor income is increasing the income level of people who are consuming much below the all India level.

• Supply of edible oils , mainly palm oil, by the Government at subsidized rates under PDS .

• Duty Free-Regime: Zero percent duty and now 2.5% on crude imports has facilitated lower oil price to consumers and in turn push demand.

India has a Promising Demand Growth

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India’s Short Term & Long Term

Demand Projection

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36

Year

Population

@1.76% Growth

Consumption @ 3% Growth



In Bn Per

Capita Kgs

Mn. T Per

Capita Kgs

Mn. T Per

Capita Kgs

Mn. T

2012 1.20 13.9 16.68 13.9 16.68 13.9 16.68

2013 1.22 14.3 17.44 14.4 17.56 14.5 17.69

2014 1.23 14.7 18.08 15.0 18.45 15.2 18.69

2015 1.25 15.2 19.00 15.6 19.5 15.9 19.87

2016 1.26 15.6 19.65 16.2 20.41 16.6 20.91

2017 1.28 16.0 20.48 16.8 21.50 17.4 22.27

2018 1.29 16.5 21.28 17.4 22.44 18.2 23.47

2019 1.31 17.0 22.27 18.0 23.58 19.1 25.02

2020 1.32 17.5 23.10 18.72 24.71 20.0 26.4

India’s Population & Consumption of Edible Oils 2012-2020

Source : SEA

37

2011-12

2012-13

Oils

Nov.’11 to Oct’12

Nov.’12 to Feb.’13

2012-13 Projection

RBD Palmoein 1577 483 1800

Crude Palm Oil 5944 2561 6500

Crude Soybean Oil 1079 201 1000

Crude Sunflower Oil 1135 331 1000

Rape (Canola) Oil 91 8 100

Others 105 70 100

Total 9981 3646 10500 +

Import of Edible Oils by India

India also Imports about 200,000 tonnes of Non-Edible Oil for Industrial Purpose

Qty: ‘000 Tonnes

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Parameter 2013 2015 2020*

Population (in Bn) 1.22 1.25 1.32

Total Demand (MnT) 17.5 19.0 23.10

Domestic Supply (MnT) 6.8 8.0 9.2

Import (Mn T) 10.5 11.0 13.9+

Import as % Share of Demand

60% 57% 61%

* Based on 3% Growth

Edible Oil Demand and Import Projection Short & Long Term

(Excluding Non-edible Oils)

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The Way Forward

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Economic Survey 2011-12 Edible Oil Economy

“India is one of the largest producers of oilseeds in the world.

However, 50 per cent of its domestic requirements are met

through imports, out of which crude palm oil and RBD palmolein

constitute about 77 per cent and soybean oil constitutes about

12 per cent.

Import dependence was about 3 per cent during 1992-3. The

production of oilseeds,though it has increased in recent years

(from 184.40 lakh tons in 2000-1 to 297.99 lakh tons in 2011-12),

has not kept pace with the demand for edible oils in India.

Imports have helped raise the per capita availability of edible oils

which has increased from 5.8 kg in 1992-3 increased to 14.5kg in

2010-11.”

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“One instrument for promoting future domestic production is calibration of the

import duty structure.

Large imports of edible oils are primarily due to competitive prices of edible oils in the international market and the import duty structure which has been sharply

reduced to near zero levels over time to protect consumers.

India has a market share that allows it to set some independent tariff policy that

can meet both goals better. Considering the situation, it is time

to frame a price band for edible oils in a manner that harmonizes the interests of

domestic farmers, processors, and consumers through imposition of import duty

at an appropriate rate.

The import duty would also generate revenue, which could also be utilized for an

oilseeds development programme. Recently the tariff value of all edible oils which had remained unchanged since 2006 was updated to market levels.

This is a right step for aligning the tariffs to current prices for edible oils in the

international market. By freezing the tariff value, imports had become more

attractive than domestic refining. Over time, domestic oil palm production may also gain.”

Economic Survey 2011-12 Edible Oil Economy

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Outcome of Budget 2013-14

There is no change in duty for import of vegetable oils. The industry had demanded to raise import duty on CPO from 2.5% to 10% and RBD Olein from 7.5% to 20% and maintain the duty difference of 10% to safeguard the interest of domestic farmers and refiners. Hon'ble Minister had said in the beginning of his speech that Food Inflation is worrying him and pointed that Oilseed, pulses supply-demand mismatch pushes the inflation. However, no specific measures were suggested to increase production and productivity of oilseeds in the country.

Finance Minister had chosen not to increase import duty on edible oil and decided to maintain the status quo. Sufferers will be the Rapeseed's poor farmers, as under pressure from falling prices of Palm oil, Rapeseed prices have fallen from Rs. 4200 per quintal at the time of sowing to Rs. 3400 per quintal (42% oil)at present and may go down further with the arrival pressure and touch MSP of Rs. 3000 per quintal. This will discourage farmers to continue to grow oilseeds and may switch over to other crops and our dependence on imports of Vegetable oil will further increase.

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Commodity 2004 2012 Increase

Edible Oil 99.1 150.5 51.4%

Rice 100.8 202.7 101.1%

Wheat 101.1 205.3 103.6%

Pulses 99.0 250.3 152.8

Ahar Dal 97.1 201.4 107.3

Eggs 108.1 199.0 84%

Dairy Products 99.0 175.7 77.5%

Wholesale Price Index

Edible Oil WPI is the lowest among all essential commodities

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SEA hopes that the government will review the duty

structure in the interest of the farmers and the domestic

industry by maintaining the higher rate of duty on CPO

(20%) and correspondingly also maintaining a minimum

duty differential 10% between CPO & Palmolien (10%), as

was originally recommended by the Tariff Commission and

remove the present anomalous duty structure on Palm

Products and take suitable action to set right the situation

Immediate Action required

45

What should we do for raising the production of Oilseeds & reduce our dependence on Imported Oil ?

• Ensure Remunerative price to farmers by suitable Import Duty Structure

• Avaibility of high yielding quality seeds at the time of sowing

• Encourage Shifting of crop from grains to oilseeds by offering higher MSP • Better Irrigation Facility

• Higher allocation of funds for Oilseeds Development Programme as recommended by Economic Survey

• Promotion of Oil Palm crop

• Fullest exploitation of Rice Bran Oil & Minor Oils potentials

Dr. B. V. Mehta Executive Director

The Solvent Extractors’ Association of India A Premier Association of Vegetable Oil Industry & Trade in India

ISO 9001:2008 Organisation

142, Jolly Maker Chambers No. II, 14th Floor, 225, Nariman Point, Mumbai 400 021

Tel: (+91-22) 2202 1475. 2282 2979, Fax.: (+91-22) 2202 1692

Email: [email protected] , Website:www.seaofindia.com

File ://NACER 2013 Word// Presentations

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Special Presentation Overview of Indian Oilseed...

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