Reading The Palm Right

Pushing oil palm cultivation at home to reduce import bills may put farmers at risk if India does not learn from the tragedies in the neighbourhood

Tehelka, 15 December, 2013

(Top photo) Early Mover The Yeroor estate, owned by Oil Palm India, came up in Kerala
four decades ago. Photo: N Bhakti

Last month, when Union Agriculture Minister Sharad Pawar addressed the agriculture and horticulture ministers of the northeastern states in Gangtok, he urged them to promote oil palm in a big way to reduce India’s dependence on edible oil imports — worth more than Rs 63,000 crore last year — and to benefit the farmers in the region. “On account of its fertile land, abundant water resources, dependable rainfall and vast biodiversity, the northeastern region holds tremendous potential on the agricultural front. The country can save its import bills considerably if the farmers productively exploit the oil palm potential of the region,” he said, adding that, so far, only Mizoram has been promoting oil palm cultivation, while Arunachal Pradesh and Nagaland are taking to it.

India is the world’s fourth largest producer of oilseeds. Oil palm contributes a meagre 0.1 million tonnes to our combined harvest of 31 million tonnes, dominated by rapeseed, mustard and soyabean. So why the emphasis on oil palm?

India accounts for nearly 15 percent of the global area under oilseeds, but only 6-7 percent of the global yield. Due to low productivity, the domestic supply of oilseeds cannot meet even 50 percent of the demand of our billion-plus population even though per capita consumption in India (14.1 kg/annum) is much lower than the global average (23.6 kg/annum), or that of China (22.7 kg/annum) and Pakistan (21.7 kg/annum). As a result, the dependence on imports has been surging, particularly since 2007-08. And palm oil contributes to around 75 percent of that.

Economic growth and higher per capita consumption will lead to greater dependence on imports. With rising competition over finite agricultural land among different crops, only higher productivity can bridge the demand-supply gap. The answer is oil palm that produces 4-6 tonnes of crude palm oil and 0.4- 0.6 tonnes of palm kernel oil per hectare during its productive lifespan of 20 years, compared to a yield of less than 1 tonne per hectare from other oilseeds. This also gives palm oil a distinct price advantage.

The arithmetic hasn’t escaped India. The government launched the Oil Palm Development Programme (OPDP) in 1991- 92 under the Technology Mission on Oilseeds and Pulses (TMOP) with a focus on area expansion in Andhra Pradesh, Karnataka, Tamil Nadu, Odisha, Gujarat and Goa. From 2004-05 onwards, the scheme is being implemented as part of the Integrated Scheme of Oilseeds, Pulses, Oil Palm & Maize (ISOPOM) to support oil palm cultivation in another six states: Assam, Kerala, Maharashtra, Mizoram, Tripura and West Bengal.

Of the 15 million hectares under oil palm production globally, India accounts for only 0.15 million hectares. But the acreage has been growing at 21 percent compound annual growth (CAGR) rate during the past five years. Palm oil production in India has grown at 22.7 percent CAGR over the past five years to reach 105,513 tonnes in 2011. With 100 percent achievement of acreage target during 2004-10 under OPDP, Andhra Pradesh is the leading producer in India, contributing nearly 86 percent of the national production, trailed by Kerala (10 percent) and Karnataka (2 percent).

According to estimates, India has the potential to cultivate oil palm across 1.03 million hectares to produce 4-5 million tonnes of palm oil, enough for 330 million people. For 2011-12, the Oil Palm Area Expansion (OPAE) programme set a target of bringing an additional 60,000 hectares under oil palm cultivation. Of course, it is highly productive. It is cheap. The oil is not unhealthy (see box) as thought earlier. And yet, the government’s urgency to push farmers to oil palm may backfire.

Rise and fight The writing is on the wall
in Indonesia. Photo: L Karlo

The Dirty Palm
For all its economic advantage, oil palm is one of the most controversial crops. Thanks to rising global demand, palm oil production more than doubled in the past decade. Indonesia and Malaysia account for 87 percent of the globally traded palm oil. The plantation, spread across 16 million hectares in these two countries, is also responsible for a third of their combined loss of forest in the past decade.

The usual practice is to burn an area after felling forests or draining peat swamps. The resulting haze is a major health hazard. Whether burnt, dried or simply left to rot, dead trees and vegetation release greenhouse gases (GHG) that trigger global warming. The World Wide Fund for Nature (WWF) estimated that the expansion of oil palm plantations is likely to cause 4 million hectares (more than twice the size of Kerala) of forest loss in biodiversity-rich areas — such as Sumatra, Borneo, Papua New Guinea and the Congo basin — by 2020.

Environmental damage, biodiversity loss and climate change apart, such rapid and widespread change of land use also has serious social impact. These include land conflicts, exploitation of labour, pesticide poisoning, land hoarding, smallholder indebtedness, food shortages and denial of the rights of the indigenous people.

A field visit to north Labuhan Batu district of Indonesia last month revealed how deep-seated the conflict between oil companies and local communities was. In every direction as far as one could see, it was oil palm monoculture. Barring a rare bulbul, not a bird chirped. The dense lifeless monotony of green — except for monitor lizards, rats and, therefore, snakes — told a grim story of biodiversity loss.

The plantations mostly belonged to “companies”, rued the otherwise hospitable villagers. And the oil mills too. Left vulnerable by the law, they have been fighting a tough battle under the banner of local NGOs to reclaim their ancestral land, or the right to sell their produce to whichever mill they choose for a decent price. Then, there were labourers, whose indigenous ancestors were brought here as bonded labour from other parts of the country, still fighting for basic minimum wage.

Farmers of Bukit Perjuangan village in Indonesia’s Labuhan Batu
district show off land they have reclaimed. Photo: L Karlo

The farmers differed in their choices. Issues of deforestation and biodiversity did not bother many, perhaps because Labuhan Batu lost its forests to oil palm many, many decades ago. Some wanted to abandon oil palm in favour of food crops. Others were keen to continue with the lucrative oil plant as smallholders or cooperatives. But all of them vied for the freedom to choose their destiny in a system where “companies” and the government decide pretty much everything.

At Medan, during a workshop on the plight of communities in oil palm areas during 7-9 November, the more articulate locals narrated story after story of gross violation of even the weak and inadequate Indonesian laws and human rights by the “companies”. The narratives did not change much across the oil palm world — from Cameroon to Malaysia. Everywhere, authorities rarely sought free, prior and informed consent from the smallholders.

To push for sustainably produced palm oil, the Roundtable on Sustainable Palm Oil (RSPO) was set up in 2004 as a multi-stakeholder forum, bringing together oil palm producers, processors, traders, retailers, financiers and NGOs. The RSPO’s standard requires producers not to clear primary forest or any land that is important for wildlife and communities and also address soil erosion, pollution, labour health and safety, etc. Despite significant breakthroughs, the global market for RSPO-certified palm oil remains low.

“How soon oil palm cultivation will become an environmentally sustainable and socially responsible enterprise depends a lot on the consumer countries. Along with China, India accounts for 34 percent of the global palm oil import. Certainly, Indian companies, the government and the people have a role to play,” said Marcus Colchester, senior policy adviser with the Forest Peoples Programme, an international NGO.

India’s palm oil consumption has increased from 13 percent of the global consumption in 2007 to 15 percent in 2011-12, outpacing the global growth rate. As global palm oil consumption is predicted to triple by 2050, India will play a key role in driving the production, both in terms of quantity and quality. And now with this push to oil palm cultivation at home, India will be watched even more closely.

The Clean Palm
It may be difficult for the highly price-sensitive Indian consumer to pay more to import clean palm oil, but it is tempting to believe that domestic production is not likely to cause deforestation and biodiversity loss of the kind witnessed in countries with lax green norms.

Oil palm reached the Far East more than a century ago. The Dutch colonisers brought the plant to Indonesia in the 1890s and wiped clean vast areas in the absence of any regulatory mechanism.

Even today, Indonesian laws are nowhere close to the stringent environmental safeguard regulations India has on paper. Unless, oil palm rush becomes an issue of India’s “national interest”, like mining, necessitating the rulebook to be junked.

Even otherwise, oil palm can inflict significant damage to the environment by causing permanent loss of community forests in India. In Mizoram, for example, the success of the New Land Use Policy (NLUP) scheme means farmers are switching to permanent oil palm plantations from traditional shifting (jhum) cultivation. The same pattern will follow as oil palm penetrates other northeastern states. In other areas, plantation may replace food crops, such as paddy, if it is promoted as way too profitable.

But unlike the Eucalypt plantations that replaced massive swathes of forest during the 1970s and 1980s — particularly after the National Commission on Agriculture (1976) predicted huge demand for pulpwood by the turn of the century — it is not possible to clear forests to promote any crop since the National Forest Policy was revised in 1988.

At the same time, while many consider palm oil dirty, it is really the way the ground is laid. Where forests and peat land is not destroyed, farmers and indigenous people are not evicted or enslaved and production follows sustainable models, oil palm can be a useful smallholder crop that brings economic benefits. Is that the path the government is charting out for our farmers? Unfortunately, while they are certainly not being coerced to adopt oil palm, they are not being adequately informed.

Fingers Crossed Fresh fruit branches of oil palm in Odisha’s Ganjam district. Photo: N Bhakti

Though highly productive compared to other oilseeds, oil palm makes farmers wait for four years before yielding palm fruit bunches. Under ISOPOM, support is promised for planting material, cultivation cost, installation of drip irrigation system, diesel pump sets, training, development of waste land and technology transfer through demonstration and publicity. The government also offers subsidies to farmers and promotes inter-cropping, such as banana or pineapple, during the four-year gestation period. But will the farmer be secure even if he manages to tide over this period?

The ideal locations for oil palm trees are within eight degrees latitude north and south of the Equator. Therefore, India is not a natural oil palm area. The trees also need regular rainfall throughout the year but may tolerate 3-4 months of dry period with irrigation support. This puts significant pressure on local hydrological systems. In short, oil palm may not be a long-term prospect in many of the areas where they are being pushed.

But the most crucial factor is the small landholding nature of the average Indian farmer. Small and marginal farm holdings discourage investment. Big companies demand large, farm-owned estates (and cheap labour) for the economy of scale that ensures fat profit margins. No wonder, the entry of large private players into planting has been limited in India, compared to Malaysia or Indonesia. Worse, despite generous government subsidies, there are very few oil mills where farmers can sell the highly perishable fruits for a good price. As a result, a number of plantations have been chopped off in Andhra Pradesh, India’s palm oil champion.

“We cannot run too many mills depending entirely on small farmers or cooperatives for FFB (fresh fruit branches) supply. To ensure efficiency, we need company-owned plantations of substantial expanse like Indian companies have invested in other Asian countries and also in Africa. Even with subsidies, it is very risky investing in mills, betting on the skills and whims of small farmers,” says a senior official in an agro company on condition of anonymity.

However, an official with the OPDP feels that private companies resent the legal framework that disallows them “greater control” over the production process. “The price of FFB anyway depends on the global market over which the government has little control. On top of that, if we allow private players to influence procurement prices to their advantage, the farmer will suffer. I agree, we need an efficient market and we are trying,” he says, ruling out “any large-scale acquisition” of farmland by companies.

But if small farmers are drawn into oil palm in large numbers only to discover that there is no market for their produce after four years of gestation period, many of them may anyway be forced to sell their land to merely repay debts or get by. Inexplicably, the government is pushing the oil palm dream to farmers in many areas as a golden package that will ensure income for generations over 40 years. Depending on the breed, oil palm’s productive life is of 18-21 years, and unless a smallholder can recover enough (or is subsided again) for the expensive replanting process and support his family for yet another gestation period of four years, he may well be forced into distress sale.

Few remember that Rayalaseema farmers took to groundnut en masse after the Centre offered subsidised seeds in the early 1980s to reduce the edible oil imports bill. But restrictions on importing palm oil were removed in the 1990s and groundnut prices crashed spectacularly. If, as a nation, we have not become completely indifferent to the farmer’s plight vis-à-vis the accounting books, India may still learn from its own pockmarked history and that of its neighbours and ensure that our oil palm tells a different story.

The Palm Advantage

Oil palm originated in West Africa and is a perennial crop. The fleshy mesocarp of the palm fruit yields 45- 55 percent of the oil. Palm kernel oil, as the name goes, is from the kernel. Palm oil yield of 3.80 tonnes per hectare per year is around nine times that of soyabean, seven-and-a-half times that of rapeseed and six times that of sunflower oil.

Global edible oil consumption has grown from 123 million metric tonnes in 2007 to 158 MMT in 2012. At 48.7 MMT, palm oil is the largest consumed edible oil in the world, largely due to its substantial price advantage. Unlike vegetable oils, it requires little or no hydrogenation for production of margarine, bakery shortenings and confectionery fats. Most packaged food products — cakes, biscuits, icecreams — contain palm oil.

As a non-food ingredient, palm oil is used in the oleochemical industry (soaps, candles, etc), as a base material for the production of surfactants used in laundry detergents, household cleaners and cosmetics. According to US Department of Agriculture estimates, 75 percent of the global palm oil consumption is for edible purposes, 22 percent for industries and the remaining for biodiesel.

Concerns over the health hazards associated with trans-fatty acids (TFA) and genetically modified organisms (GMO) have also raised the demand for palm oil, which is neither derived from a GMO nor contains TFA. Several studies in the past have linked palm oil to cardiovascular diseases; excessive intake of palmitic acid has been blamed for rocketing blood cholesterol levels. However, recent studies have accepted it as a replacement for hydrogenated vegetable oils and observed that it brings down bad cholesterol while boosting the good.

Jay Mazoomdaar was a consulting editor and this is the last report he filed for TEHELKA