India to Buy Oilseeds Directly From Farmers for First Time

In a move designed to increase production and reduce its import cost of $12 billion, India will be buying oilseeds directly from farmers for the first time this year.

India is the world’s top edible oil consuming country – over the past 20 years consumption has tripled, but production has increased by less than a third, resulting in a twelve-fold increase in imports. In the face of these daunting figures, Prime Minister Narendra Modi, has set a goal to be self-sufficient within five years. To achieve this lofty goal, he has cited price supports and guaranteed purchases as the two best paths to reaching the objective.

Edible oil is India’s third largest import behind crude oil and gold. The serious production deficit compared to consumption has driven the country to import $10 billion of edible oils per year from Indonesia and Malaysia, and $2 billion in pulses from Canada and Myanmar.

The state-run Food Corporation of India (FCI) will begin buying in October, with larger purchases in March, under a plan much like the one instituted for rice and wheat which have had price support programs in place since the 1960s.

Although the FCI has had success in driving India to self-sufficiency in wheat and rice through price supports and guaranteed purchases, some harbor doubts that the FCI does not have the expertise in oilseeds and pulses to efficiently conduct such a program, while others are concerned that thefts will increase if the FCI buys oilseeds that need to be processed before being sold.