- An estimated 50% of consumer products, including make-up and hygiene products and household foods, contain palm oil.
- India’s consumption of palm oil significantly exceeds domestic production and it remains the biggest buyer with as much as 70% of its demand being met through imports.
- With major impacts in countries like Indonesia and Malaysia from where it is sourced, palm oil and its ecological footprint remain absent from attention in the Indian retail and consumer context.
- Palm oil can be produced in a responsible manner that respects the environment and the communities where it is commonly grown. As the largest consumer, perhaps the time is also right for India to demand more sustainable palm oil, writes Neha Simlai in this commentary.
Palm oil finds a way into the lives of Indians, every day. From toothpaste, soap and moisturiser to ice cream, milk powder and chocolate. From margarine to cake and from loose edible oil (Vanaspati) straight into the incredible Indian array of savouries (chips, bhujia, namkeen, samosas, pappads, pav-bhaji and vadas etc.).
It is estimated that 50% of consumer products, including make-up and hygiene products and household foods contain palm oil.
Palm oil is derived from the mesocarp of the fruit of the oil palms. Due to high productivity at a production stage comparatively low prices and continued versatility in the kitchen, palm oil lies at the crux of the global edible oils market. It remains by far the most efficient vegetable oil to grow as it takes less land to produce than other vegetable oils. More importantly in India, it forms the bulk of vegetable oils sector.
There is a complex relationship at play here. Most Indians do not know or recognise the palm oil in the products that they use.
Consumption of palm oil and its derivatives has grown by almost 230% over the last two decades. Given the nutritional needs of a growing population, India’s demand thus remains relatively inelastic (wherein the demand is not determined by the prices) in the short run.
Interestingly, so does India’s dependence on producer countries like Indonesia and Malaysia where the bulk of this oil is currently being imported from. These geographies continue to be associated with global deforestation and peatland destruction.
It is estimated that over 25% of Indonesia’s rainforests have been deforested and replaced with vast palm oil plantations: man-made monocultures. Globally palm plantations have been found to soak up huge amounts of groundwater and cause depletion of soil health in addition to biodiversity loss and peatland destruction. Ongoing industrial-scale deforestation also leads to rising carbon emissions.
Together Indonesia and Malaysia account for 85% of the world’s palm oil output along with the 42 other countries that also produce palm oil in largely the same belts (10 degrees north/south of the equator) as many of the world’s remaining primary rainforests.
The factors that have made palm oil a success have also brought with it well-documented environmental and social challenges. The thrust of the problem lies in the fact that despite the environmental challenges associated with it, palm oil continues to sustain the developing world. Three billion people across developing contexts including India, sub-Saharan Africa and South-East Asia consume palm oil due to relatively low prices and the neutral taste/odour profile. At present India’s consumption of over 10 million metric tonnes (MMT) of palm oil significantly exceeds domestic production and it remains the biggest buyer with as much as 70% of its demand being met through imports. In a Davos meeting in January 2020, the trade ministers of India and Indonesia set the aim of increasing bilateral trade to $50 billion by 2025.
However, as COVID-19 hit India’s imports of crude palm oil (CPO) and RBD (refined, bleached and de-odourised) palmolein stood at around 334000 MT in March 2020, a steep 58.2 percent drop compared to around 814000 MT for the same month of 2019.
Newspaper reports posit that this dip in imports could also have been triggered by a four-month lull in India-Malaysia trade following a diplomatic row. Trade has now resumed amid improving relations between the two countries after the formation of a new government in Kuala Lumpur.
In the political economy of palm oil, India holds major agency. Given India’s recent commitments to the Sustainable Development Goals and its presidency of two conservation-oriented conferences of parties (COPs) – Convention on the Conservation of Migratory Species of Wild Animals as well as Convention to Combat Desertification – palm oil could be the major thread tying together the deforestation-import-consumption-stewardship interconnection.
With major impacts in countries like Indonesia and Malaysia from where it is sourced, palm oil and its ecological footprint remain absent from attention in the Indian retail and consumer context. More importantly even consumers that may be aware may not prioritise off-shore deforestation risk. While consumers will remain difficult to limit, at this point, more advanced markets are looking at responsible production which anchors itself in increasing and incentivising the inclusion of best management practices in production, standards and certification and associated public opinion shaping. The learnings for India are especially important at this juncture of time.
In India, even as this narrative around palm oil’s ecological footprint takes shape, there is a need to focus on the issue of food security. The Global Hunger Index 2019 ranks India at 102 out of 117 countries, and with a population of 1.37 billion people, all policy making in India is pivoted on food security. It is clear (and perhaps most important) that for the government of India the increase in domestic production, aimed at import substitution with a view to increasing food security will continue to take precedence over sustainable sourcing from other geographies at this stage. This has been further amplified now by the strong emphasis laid on local supply chains (Atmanirbhar Bharat Abhiyan) in the aftermath of the COVID-19 crisis.
As the largest consumer and importer of palm oil: a commodity that is associated with both food security in the country but also associated with smallholder incomes, as well as significant offshore ecological footprints, India’s position in South-South Cooperation and agency as a steward of regional trade is perhaps stronger than ever before.
Palm oil can be produced in a responsible manner that respects the environment and the communities where it is commonly grown – a worthy goal for the government, companies and consumers to pursue.
As India reassesses and assimilates its impact and role as the largest consumer, perhaps the time is also right for it to demand more sustainable palm oil. This can be done by:
- Promoting standards and certifications to
- Localise their understanding of sustainability agenda (IPOS – which is steered by the Solvent Extractors Association and the National Interpretation for India being carried out by the Roundtable of Sustainable Palm Oil)
- Build on the work being done by civil society actors like WWF, Rainforest Alliance and others who have been working in the sector in India for at least a decade
- Help link demand with sustainable supply through new approaches that supports the production of traceable and sustainable palm oil at scale like IDH’s Verified Sourcing Areas.
- Demand that progressive companies (like Godrej, Unilever, Nestle, PepsiCo) looking to make public commitments on their uptake of sustainable palm oil extend these commitments to India as well.
- Encourage smaller companies that can make smaller shifts to sustainable palm oil by working on a process of continuous improvement rather than a one-size-fits-all approach.
- Support policy engagement for import regulation and increased uptake of responsibly sourced palm oil.
Some groups have been advocating a shift away from palm oil. In itself, this is not feasible since removing palm oil across product lines could result in agricultural expansion of other commodities in other areas or a shift to another products that may come with bigger issues. More importantly a shift away dismantles the efforts of companies, making public commitments on responsible sourcing and are indeed in the process of improving their value chains.
Larger uptake of sustainably produced and sourced palm oil will create benefits of scale, reducing sourcing costs. And increased demand will create economic incentives for palm oil producers to delink deforestation from their production and implementing good agricultural practices.
The author works on Market Transformation across commodity value chains at IDH The Sustainable Trade Initiative. She has been engaged on the palm oil value chain in India for almost a decade. She is also the Founding Director of the New Delhi-based policy think tank – SPRF India.
Banner image: Palm oil fruit. Photo by Neha Simlai.