India’s consumption of edible oil has risen to around 17.5 million metric tonne (mmt) in 2012-13 from 11.6 mmt in 2003-04, at compounded annual growth rate (CAGR) of 4.6% during the period under consideration, according to data available from the Solvent Extractors Association of India (SEA).
With growing population, India’s demand for edible oil has been rising consistently with CAGR of 2.7% in the last three years and around 5.5% in the last five years. Apart from population growth, another significant factor that is impacting edible oil demand is the increase in disposable income amongst the growing middle-class. This has led to change in the lifestyle, which has increased the consumption of edible oils.
India imports half of its edible oil requirement, making it the world’s third-largest importer of edible oil. The country buys soya oil from Argentina and Brazil and palm oil from Malaysia and Indonesia. Currently, India accounts for 11.2 per cent of vegetable oil import and 9.3 per cent of edible oil consumption.
The edible oil industry in India is largely driven by import of edible oils. Each segment in the edible oil industry is subject to a gamut of different factors such as price hikes and change in government policies. The edible oil industry in India has grown at a CAGR of 13.1% from Rs 638.4 billion in FY’ 2009.
India is the world’s fourth-largest edible oil economy, after USA, China and Brazil with 15,000 oil mills, 711 solvent extraction units, and 264 vanaspati plants; and over 1,000 refineries employing more than one million people.
The total market size is at Rs 600 billion and import-export trade is worth Rs 130 billion. India being deficient in oils has to import 40% of its consumption requirements. The domestic turnover of the vegetable oil industry is Rs 70,000 crore and import-export turnover of about Rs 16,000 crore per annum, consists of Rs 10,000 crore for import of edible oils & Rs 6,000 crore for export of oilmeals, oilseeds, castor oil, groundnut oil & vegetable fats of treeborne oilseeds. India's edible oil industry is growing at a CAGR of 90 per cent. Currently, India accounts for 7.4% of world oilseeds output; 6.1% of world oilmeal production; 3.9% of world oilmeal export; 5.8% of world vegoil production; 11.2% of world vegoil import; and 9.3% of the world edible oil consumption.
The competition in India is highly fragmented owing to the presence of a large number of organised as well as local and unorganised players. After China, India is the second- largest producer of rice bran oil. The country has the potential to produce more than 1.4 million tonne of rice bran oil. The sunflower oil market revenues during the period FY 2009- FY 2014 have surged at a healthy CAGR of 3.2%. In the last five years, the blended oil market in India has also witnessed a healthy and steady growth.
The Indian edible oil industry is the fourth-largest edible oil consuming economy after USA, China and Brazil. India accounts for 9.3% of world oilseed production. The consumption pattern of edible oil also varies across the country.
In 2007, the per capita consumption was 11.44 kg while in 2010, the per capita consumption increased to 12.87 kg. In 2015, the per capita consumption is expected to be 15.66 kg.
FDI
Foreign Direct Investment (FDI) policy can greatly benefit the edible oil industry. India’s imports of edible oils can be reduced if manufacturers are able to import oil processing machinery and equipment that is state-of-the-art. Companies like Pennwalt and Alfa Laval have been working in this area for some time.
FDI Policy - 100% FDI is allowed in Indian vegetable oils and vanaspati industry through the automatic route. Moreover in the food processing sector and private oil refineries sector, 100% FDI is allowed through the automatic route.
Equipment Needed for Edible Oil Refining, Deodorisation and Bleaching
The edible oil industry is always on the lookout for cost-effective technologies so that they can meet their profitability goals. Edible oil manufacturers and marketers are looking out for efficient and customised solutions. Sophisticated technology can enable them to produce cooking oils on a mass scale so that they can reduce costs due to economies of scale and also have an assurance of improved quality of the cooking oils produced. The FDI policy is geared up to support this objective of edible oil manufacturers.
The fruits of innovation propel the growth in technology that can benefit the edible oil industry.
Winnower, sieve, washer; Mechanical decorticator or sheller; Pestles and mortar, hammer mill, roller mill or pin mill; Manual or mechanical grater; Seed scorcher, heating pan; Oil flotation equipment, press or expeller; Heater and pan; Filter bag or filter press; Steam vessel and vacuum pump; Treatment tank with stirrer; Storage tank or bottles.
Process of refining edible oil
The process comprises degumming, neutralisation, bleaching, deodorisation and winterisation. In refining, the free fatty acid in crude vegetable oil is neutralised with caustic soda. The resultant sodium soaps are removed by centrifugal separators or by batch settling. The oil that is now obtained is acid-free and neutral. If the free fatty acids are not properly removed, then the oil so produced will become rancid (oxidised) very soon. Rancid cooking oils are not palatable for consumption and they can also be toxic to the digestive system.
Today rice bran oil is widely consumed in India and it has been branded as a healthy oil that contains PUFA (poly unsaturated fatty acids). But there was a time when it was impossible to refine rice bran oil. It contains an enzyme called lipase which leads to hydrolysis of the oil and generates a large amount of free fatty acid. It is due to a modern and sophisticated technology that was developed by Indian Institute of Chemical Technology, Hyderabad, along with international support and foreign collaboration that Physical refining can be used to distill off the free fatty acids in rice bran oil in one stage of deodorising. For physical refining to be effective, the crude oil must be degummed as efficiently as possible.
Bleaching of oils removes residual phosphatides, metals, soaps and oxidation products in addition to colouring matter. The washed and neutralised oil is preheated and fed to the bleacher through the cascade vacuum dryer. Bleaching earth and activated carbon is added to the oil through the dosing unit which is controlled by a programmable controller.
The bleacher proprietary is designed with internal partitions and set of high efficiency turbine agitators to avoid short cycling and provide necessary retention time before filtration. The conjunction of vacuum dryer with a bleacher is what is unique about Soft Bleach whereby oil going to the bleacher is thoroughly dried and deaerated in the cascade vacuum dryer and also the fugitive particles from the bleacher sucked under vacuum are scrubbed by the down coming oil.
The bleached oil from the pressure leaf filters to be transferred to the bleached oil tank for intermediate storage. A good bleaching process supported by modern technology can also remove undesirable toxic residues like pesticides, heavy metal, mineral oil traces.
Objective of FDI Inflows to Vegetable Oils and Vanaspati
India is one of the largest producers of oil/ vanaspati products in the world with approximately 15,000 oil mills, 600 solvent extraction units and 250 vanaspati units. Indian oil seed sector accounts for the domestic turnover of Rs 70,000 crore and import/ export turnover of Rs 16,000 crore. India is also the third-largest importer of vegetable oil in the world, next to the European Union and China.
Measures for boosting Foreign Direct Investment (FDI) to vegetable oils and vanaspati have been undertaken in India with the objective of expanding this sector. The food sector of India is expected to grow significantly in coming years. FDI would be effective in increasing the production of vegetable oils and vanaspati in India. Moreover better techniques of production and higher efficiency of inputs can be achieved through FDI in vegetable oils and vanaspati.
The government has accorded the sector a high priority and has undertaken several policy measures and initiatives. It has offered a number of fiscal reliefs and incentives as well as approved a large number of joint ventures, foreign collaborations, industrial licences and 100% export oriented units (EOU) proposals in different food processing areas.
Food processing industries are included in the list of priority sector for bank lending in order to ensure easy availability of credit to them; customs duty on food processing machinery has been reduced.
Key policy initiatives, infrastructure development, and capacity additions in chief sectors are bound to increase industrial and manufacturing growth and the outlook for the engineering goods sector in India looks promising. Recent government policy initiatives such as 100% FDI in most sectors will help in funds inflow and will be the catalyst for growth of this sector.
Robust agricultural growth is key to India’s growth prospects. Such a strong agricultural growth would contain inflation, support the agro-industry and services, and increase employment opportunities in rural India. Given that about half of India’s workforce is engaged in agriculture, the sector continues to be the backbone of the Indian economy.
FDI policy
With growing globalisation and with GoI approving FDI in multi-retail, the food processing sector is poised to attract significant investments to improve storage, supply chain, and other technological factors. GoI is actively encouraging investment in food and agro processing industries to reduce wastage and boost value addition.
The FDI inflows in the food processing sector, which includes food processing industries, fermentation industries, vegetable oils and vanaspati, and tea and coffee industries was ` 21.94 bn as of 2012-13 as compared with ` 8.3 bn in 2011-12, registering 50.9% CAGR during FY08-FY13.
Summary
The SME sector in India offers benefits of flexibility, lower costs and innovative capabilities. Technology is redefining the way business is transacted. The Government of India wishes to encourage “Make in India.” FDI policy in edible oil sector should result in greater investments in edible oil manufacturing in India. For this, the SME sector has to be encouraged by making capital available to them. The success of this effort will lead to massive employment opportunities and reduction of import of edible oils. The FDI policy will result in India’s self-sufficiency when it comes to production of edible oils.
Technology being a game-changer, the FDI policy can not only encourage local manufacturing but can also encourage strategic tie-ups and technology transfers between Indian companies and their foreign collaborators. This will ensure that India has world- class technology at its doorstep.
