Competitiveness and Efficiency in Groundnut Oil Sector of India

Groundnuts are a major source of edible oils in India. One of the central problems of groundnut production and processing sectors are huge inefficiencies due to uncertain production environment owing to rainfed cultivation, less resource base of smallholder farmers and processors, and low adoption rate of improved technology. This policy brief addresses critical issues binding groundnut oil sector inefficiency and international competitiveness. With the widening gap between demand and supply of edible oils in India, policy action is imperative not only to arrest surging imports of edible oils but also to benefit both producers and consumers in terms of broader employment generation and decentralized rural industrialization. Specific policy implications are highlighted in this policy brief, which encompass a) the harnessing of improved varieties with attributes like drought tolerance, high oil content, high productivity for large scale seed multiplication/distribution by both public and private agencies; b) viable village seed banks and seed networks through cycles of rabi (postrainy) season seed multiplication to meet the seed requirements of kharif (rainy season) and vice versa; c) low-cost technologies to increase profitability and reduce risk; d) oilseed clusters to facilitate scale economies and capacity utilization in processing units; and e) capital subsidies to accelerate technological upgrading to shed inefficiency in the processing sector. The expected gains in efficiency in both production and processing of oilseeds are expected to produce measurable producer and consumer benefits, which will justify proposed non-market distorted subsidy for both seeds and technological upgrading in the processing sector