Cabinet approves National Mission on Edible Oils – Oil Palm with an outlay of Rs 11,040 crore

New Delhi, August 19, 2021

The Union Cabinet on Wednesday gave its approval for the launch of a new Mission on Oil Palm, to be known as the National Mission on Edible Oils – Oil Palm (NMEO-OP) as a Centrally sponsored scheme with a special focus on the North East region and the Andaman and Nicobar Islands.

A financial outlay of Rs. 11,040 crore has been made for the scheme, out of which Rs 8,844 crore is the Union Government share and Rs 2,196 crore the State share, including the viability gap, an official press release said.

Under this scheme, it is proposed to cover an additional area of 6.5 lakh hectares (ha) for oil palm till the year 2025-26 reaching the target of 10 lakh hectares ultimately. The production of Crude Palm Oil (CPO) is expected to go up to 11.20 lakh tonnes by 2025-26 and up to 28 lakh tonnes by 2029-30.

The scheme will immensely benefit the oil palm farmers, increase capital investment, create employment generation, shall reduce the import dependence and also increase the income of the farmers, the release said.

Since 1991-92, efforts have been made by the Government to increase the production of oilseeds and oil palm. The oilseeds production has increased from 275 lakh tonnes in 2014-15 to 365.65 lakh tonnes in 2020-21. For harnessing the potential of palm oil production, in the year 2020, an assessment by the Indian Institute of Oil Palm Research (IIOPR) for the cultivation of oil palm noted cultivation in around 28 lakh ha. Thus, there is huge potential in oil palm plantation and subsequently production of CPO.

At present only 3.70 lakh hectares is under oil palm cultivation. Oil palm produces 10 to 46 times more oil per hectare compared to other oilseed crops and has a yield of around four tonnes of oil per ha.

Keeping this in view and also the fact that even today around 98% of CPO is being imported, it is proposed to launch the scheme to further increase the area and production of CPO in the country. The proposed scheme will subsume the current National Food Security Mission-Oil Palm programme.

There are two major focus areas of the scheme. The oil palm farmers produce Fresh Fruit Bunches (FFBs) from which oil is extracted by the industry. Presently the prices of these FFBs are linked to the international CPO price fluctuations. For the first time, the Government will give price assurance to the oil palm farmers for the FFBs. This will be known as the Viability Price (VP). This will protect the farmers from the fluctuations of the international CPO prices and protect them from volatility.

This VP shall be the annual average CPO price of the last 5 years adjusted with the wholesale price index to be multiplied by 14.3 %. It will be fixed yearly for the oil palm year from November 1 to October 31. This assurance will inculcate confidence in the Indian oil palm farmers to go for the increased area and thereby more production of palm oil.

A formula price (FP) will also be fixed which will be 14.3% of CPO every month. The viability gap funding will be the VP-FP and if the need arises, it would be paid directly to the farmers' accounts in the form of DBT.

The assurance to the farmers will be in the form of the viability gap funding and the industry will be mandated to pay 14.3% of the CPO price which will eventually go up to 15.3%. There is a sunset clause for the scheme which is November 1, 2037. To give impetus to the North-East and Andaman, the Government will additionally bear a cost of 2% of the CPO price to ensure that the farmers are paid at par with the rest of India.

The states who adopt the mechanism proposed by the Government would benefit from the viability gap payment proposed in the scheme and for this, they will enter into MoUs with the Central Government.

The second major focus of the scheme is to substantially increase the assistance of inputs/interventions. A substantial increase has been made for planting material for oil palm and this has increased from Rs 12,000 per ha to Rs. 29,000 per ha. A substantial increase has been made for maintenance and inter-cropping interventions. Special assistance at the rate of Rs 250 per plant is being given to replant old gardens for rejuvenation of old gardens.

To address the issue of shortage of planting material in the country, seed gardens will be provided assistance up to Rs 80 lakhs for 15 ha in the Rest of India and Rs 100 lakhs for 15 ha in North-East and Andaman regions. Further, assistance for seed gardens at Rs 40 lakh and Rs 50 lakh will be given for the Rest of India and North-East & Andaman regions, respectively.

Further, special assistance will be provided for the North-East and the Andaman regions in which special provisions are being made for half moon terrace cultivation, bio fencing and land clearance along with integrated farming. For capital assistance to the industry, for the North East states and Andamans, a provision of Rs 5 crore for 5 mt/hr unit will be made with with pro-rata increase for higher capacity. This will attract the industry to these regions, the release added.

NNN