Mumbai : India's vegetable oil production declined over 10 per cent in the last three years due to a reduction in the overall oilseed cultivation area, as farmers moved to better remunerative crops, including wheat, sugarcane and pulses.

Dorab Mistry, director of the London-based Godrej International and the world's most vocal personality in vegetable oil industry, estimates India's vegetable oil production at 6.4 million tonnes in 2009-10, a decline from 6.7 million tonnes and 7.1 million tonnes in 2008-09 and 2007-08 respectively. Mistry attributed an anaemic south-west monsoon as the major reason that affected the kharif crop in the country adversely. As a consequence, the output of leading oilseeds of kharif season including groundnut, soybean and rice bran recorded a shortfall.

The industry has been persistently demanding introduction of genetically modified seed in oilseed sector to salvage India from the increasing dependence on export. "It is also painfully clear that Indian agriculture is in the throes of stagnation as the government has basically run out of ideas. India will gradually become an importer of all foodstuffs and the country's rural population will either remain poor or is more likely to migrate to cities. The recent heated debate in India on the acceptance of BT brinjal was from my perspective most depressing," Mistry said.

Satyanarayan Agarwal, Chairman of Central Organisation for Oil Industry & Trade (COOIT) attributed the fall in domestic vegetable oil production to government policies. The reduction in Customs duty (currently on crude oil at "zero" and refined oil at 7.5 per cent) made imports cheaper and hence, refiners in India preferred to import crude vegetable oil and refine it before selling the product in domestic markets. More so, traders are insisting on buying more refined oil.

This year crushing parities are uniformly negative. Consequently, over half of the domestic refineries' capacities remain idle as farmers are unwilling to sell their oilseed output at a lower cost than the cost of production. For example, soyabean prices are currently hovering around Rs 20 a kg as against the profitable selling price of Rs 24-25 a kg. According to Mistry, India is likely to carry forward a large stock of oilseeds. The spread between popular local oils such as mustard oil and imported oils like RBD palmolein must narrow if local oils are to move into consumption, he added.

A farmer shifting to better remunerative crop is another reason for lower oilseed production in the country. According to the Ministry of Agriculture, total area under oilseeds production plunged to 92.27 lakh hectare on February 26 compared to 95.73 lakh hectare on the same date last year. On the other hand, India's vegetable oil consumption is estimated to have risen 18.55 per cent in the last three years from 12.99 million tonnes in 2007-08 to 15.40 million tonnes in 2009-10.