The Centre is likely to announce a five-year plan to cut expensive vegetable oil imports worth $10 billion a year in next week's Union Budget by providing farmers with financial incentives to switch to oilseeds from grains, said three senior government officials.
Higher oilseed production in India, the world's biggest buyer of cooking oils, will cut palm oil imports from Malaysia and Indonesia and trim soy oil and sunflower oil purchases from Brazil, Argentina, Russia and Ukraine.
The officials, who asked not to be named as the discussions are still private, said the plan could dramatically cut India's import bills.
"A country of India's size cannot afford to be so heavily dependent on edible oil imports, and that's why in the upcoming budget you will likely see a new push to raise domestic oilseed production," said one of the officials.
The government has already mapped out an ambitious five-year programme aiming to boost the country's oilseed production to more than 47 million tonnes from over 30 million tonnes now, said the official.
"It is likely to have a budgetary allocation of 180 billion rupees to 200 billion rupees," he said.
A finance ministry spokesman was not immediately available for comment. Finance Minister Nirmala Sitharaman is set to present the fiscal 2021-22 budget on Feb. 1.
Cut subsidy spend
A switch toward oilseeds would also bring down India's surplus output of wheat and rice and effectively slash subsidies of billions of dollars on a food grain procurement programme that farmers fear New Delhi may want to discontinue after the rollout of the government's new farm laws.
Thousands of farmers have been protesting on the outskirts of New Delhi for months against the new laws they say help large private buyers at the expense of producers.
India's vegetable oil imports, the third-biggest import item after crude oil and gold, have surged to 15 million tonnes from 4 million two decades ago.
Trade estimates suggest vegetable oil imports could reach 20 million tonnes by 2030, boosted by a growing populace with higher incomes and appetite for curries and deep-fried food.
The government would encourage farmers, especially from states such as Punjab, Haryana, Uttar Pradesh and Madhya Pradesh to switch to sunflower and rapeseed from rice and wheat, said a second official.
"Farmers won't switch to oilseeds unless they're compensated for any possible losses, and that's why the government plans to provide a per hectare subsidy for the switch," he said.
Oilseeds are now mainly grown in rain-fed areas impacting crop yields, but states like Punjab and Haryana, with efficient irrigation can expect higher yields, farming experts say.
If implemented successfully, the new programme would help India raise its edible oil volumes to 18 million tonnes from a little over 10 million tonnes now, both officials said.