The COVID-19 virus is fast spreading its tentacles in India. The country is in a lockdown mode with strong possibility that the lockdown maybe extended.
Agricultural products are part of the essential commodities basket; hence, exempted from lockdown restrictions. But due to the chain-reaction of the lockdown, the sector is facing challenges.
Crops such as wheat and mustard, harvested in Rabi season March/April, have been badly affected with the abrupt lockdown. Other crops like Soya beans, cotton, groundnuts, rice and pulses, which were harvested in November 2019, had also run into a rough patch. It is too early to project the impact on the next Kharif season, October/November. All these produces are normally sold by direct auctions from the market yards, which are now shut. Middlemen used to provide cash to farmers and also help the sale through market yards. Now, as the market yards are closed, the farmers are unable to sell off their produce and generate cash.
Transporting the harvested produce is also facing problems. There is a shortage of drivers. Spooked by fear of being stranded due to lockdowns, these drivers have left for their home villages, compounding the problem.
The government used to procure the produce like mustard at the prescribed Minimum Support Price (MSP). This has temporarily been halted, aggravating the situation. The saving grace is the reported statement from the Agriculture ministry to extend the procurement period of pulses and oilseeds which was scheduled to end on April 30. States have been tasked to complete their procurement exercise within 90 days. Assurance has also been given that States would procure 25% of the total output of oilseeds and pulses from farmers at the MSP fixed by the centre.
The table below gives the production in the years 2018-19 and estimated for 2019-20.
|Nov/Oct (Kharif + Rabi)|
|CROP (‘000mt) Nov/Oct||2018/19||2019/20|
There has been a massive impact on Palm Oil demand on account of the lockdown. The HoReCa sector is the major consumer of Palm Oil. As the biscuit industry, sweet makers and bakeries are almost non-functional, the usage of Palm Oil has stepped down considerably. The silver lining is the southern states of the country and Orrisa, where Palm Oil is the principal medium of cooking in households. However, the consumption quantity has reduced.
Even the packaging requirement is undergoing a change. The demand for oil to be packed in tins has reduced with the slump in institutional demand. The retail customer’s preference is for pouches and other household manageable packaging.
Palm Oil imports for next 3 months are projected to be around 600K per month. But, if the lockdown is extended, it could reduce to 450-500K. In such a scenario, Palm Oil could get substituted by either domestic oils or imported Soya or Sunflower Oils.
The Indian agriculture sector was expected to be hit severely by the erratic monsoons. Farmers growing wheat, mustard and pulses also complained about their crops being damaged due to unseasonal heavy rainfall. The impact is not as bad as it had seemed initially. The crop projection given in the table above subscribes to this fact. Although Crop Insurance is in place (Fasal Bima Scheme), determination of damages payable is posing challenges. The crop-cutting experiments designed to measure crop losses in the field have been delayed in several states due to the lockdown. In major agri-states like UP and MP, only 10-20% of the crop cutting experiments have been completed so far, thus delaying farmer compensation.
The extraordinary conditions will see income generation of farmers plummet. To mitigate the hardships, the government has announced a slew of measures, including:
About Rs.1.70 lakh crores (approx. USD 22 Billion) of support in the form of groceries is to be distributed to the needy. Based on the family unit as per existing ration cards, this assistance is being distributed through the Public Distribution System (PDS), a mammoth task indeed.
The Government has mandated payment of daily wages to all workers, including to contract employees. This is to be paid by firms even if the workers do not report for work. How many companies follow this diktat of the government needs to be seen as there is a massive fall in the revenue of these firms. When revenues are in a limbo, how feasible would it be to continue paying labour for no work, is a question to which no answers have been provided.
Help may not reach the last mile in time and in the measure needed. This will impact the consumption patterns of Palm Oil and other oils. The per capita consumption of edible oil is estimated to fall by 5-8% in the short term, probably a first in Indian history.
The country is in for hard times and the consumption of edible oil will be a casualty. It can only be hoped that a vaccine is found expeditiously and the damage done is reversed, though that itself will be a long-drawn affair.
Prepared by: Bhavna Shah
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