Edible Oil

EMP33/A/23 - ATUL KANT

BE - Contact 2- Week2

Application Exercise

"India's economy would reap a better demographic dividend and would grow faster in the next decade" - Examine how your company is gearing up to benefit from the economic Boom?

India subcontinent already has the daunting challenge of feeding 1.2 billion people with limited land and water resources. Over the next 20 years or so, this challenge will be even more intense as the country's population is likely to grow to 1.6 billion, surpassing China's. Overall economic growth rates should remain robust, driven by the "demographic dividend" of a young population and increasing rates of income, savings and investment. Consequently, the pressure on food is going to mount tremendously, as an average Indian still spends roughly half of household expenditures on food. One of the most important nutrition in human life is Oils and Fats where our country is lagging behind in terms of its demand and consumption for oils and fats. The current per capita consumption in India is 9 kg while world average is nearly 18 kg . The fat consumption in developed countries is 22 kg with US having 28 and China is 23 kg . Clearly , the fat consumption in India is far below the average world standard and we see a big opportunity in expanding our markets for edible oil.

Secondly , India's eating habits demand more edible oil , than are currently being produced. More than 50 percent of the edible oil that India consumes is imported, an expenditure that is much higher than that for cereals, largely because of rising demand due to higher incomes.

Unfortunately, the domestic yields of oilseeds in India remain very low, partly because there are few major improved varieties of these commodities, but also because they are grown largely in rain-fed environments that are prone to climate instability. Only 25 percent of oilseed areas are irrigated. Further, the incentive policy announced through the Minimum Support Prices (MSP) mechanism remains largely on paper as there is no effective procurement mechanism for these commodities. As a result, whenever production goes up, market prices fall below MSP levels, as happened even in an agriculturally advanced state like Punjab for sunflowers between 2008 and 2010.

The government has recently announced special programs for palm oil and pulses. But the allocations are too small to make any significant dent in the situation. They will continue to remain heavily dependent on the behavior of the monsoon, leaving volatility in Indian agriculture a major factor. Since the India neither appear to be focussed nor is adopting any strategic framework , it seems that India is not ready to solve this dilemma in the near future.

Therefore