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Soy oil imports jump as MP farmers seek alternativesThe Narmada river belt has become the new rice bowl of Madhya Pradesh, much of it at the expense of soy

Soy oil imports jump as MP farmers seek alternativesThe Narmada river belt has become the new rice bowl of Madhya Pradesh, much of it at the expense of soy
Sanjeeb Mukherjee | Indore/Bhopal October 7, 2014 Last Updated at 22:34 IST
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Mukesh Rai looks like a normal 21-year-old college student, except for the ease with which he lists the benefits of basmati rice for farmers in Madhya Pradesh as opposed to soybean.

In a grey shirt and off-white trousers, Rai is one of thousands of 'kisan mitra' (farmers' friends) employed by the Madhya Pradesh government to spread best farm practices. His job is to explain the benefits of basmati to farmers facing successive losses from growing soy.

"Soy is dead in this part of Madhya Pradesh as farmers have been losing money on it over the last few years. On the other hand, basmati allows them to own jeeps and harvesters in a few years," says Rai, pointing to a gleaming new Mahindra Bolero parked in a field in Eatkheri village.

Helping Rai's basmati pitch are big processing units, massive warehouses and easy availability of PUSA 1121 varieties in Hoshangabad, Raisen, Babai and Itarsi. The state has been contributing by pushing for Geographical Indication certification for rice grown in Madhya Pradesh in the belief that its features are distinct from those grown in Punjab and Haryana.

"Daawat has started a big processing unit in the area. Big rice exporters from Haryana, Uttar Pradesh and Punjab have started purchasing basmati from this region," adds Rai, stopping to direct workers sprinkling plant chemicals. Though rice need more pesticide than soybean, the returns are equally good, he says.

Just a couple of miles away is the lush four-acre farm of 50-year-old Manohar Singh Yadav, who switched to basmati this year. "The maximum return any farmer can get from soy in this region is around Rs 2,500 a quintal. Basmati can fetch up to Rs 4,000," he says. Singh has been growing soy for the last 25 years. He shifted to rice after other farmers told him of the benefits.

The Narmada river belt within a radius of 60-100 km from capital Bhopal has become the new rice bowl of Madhya Pradesh, much of it at the expense of soy. Rice sowing in the just concluded kharif season (2014-15) in the state has climbed to 2.1 million hectares from 1.8 million hectares last year. Soy's area has dipped to 5.5 million hectares, the lowest since 2010.

India's edible oil consumption in August rose to a record 1.3 million tonnes, driven mainly by soy, whose imports rose to a two-decade high of 350,373 tonnes.

"The drop in acreage is not an immediate challenge to the overall soy crop in Madhya Pradesh because farmers are preferring basmati only in a particular belt, not across the state," says S K Srivastava, head of the Directorate of Soybean Research in Indore.

The research centre, on the road from Indore to Khandwa, is one of India's oldest and most reputed research bodies on soy. Founded in the late 1980s, the central government institute changed its name from the National Research Centre for Soybean a few years ago to avoid confusion with similar sounding state bodies.

"In the last three years 200,000-300,000 hectares have shifted from soy to basmati, which is minor and quite natural, considering soy is grown on 5.5 million hectares in the state," Srivastava adds.

He says the shift to rice will not happen soon in the prime Malwa-Nimar belt as farmers there still see value in soy. Comprising nine districts of Madhya Pradesh, the Malwa-Nimar region has been home to India's soy industry since the mid-1980s.

"Farmers usually plant three crops a year and soy takes only 85-90 days to mature. Rice matures after 120 days. It is unlikely that farmers of Malwa-Nimar will switch to rice," Srivastava adds.

He says the low water table also makes rice farming unremunerative. But the PUSA 1121 basmati rice varieties use the same amount of water as wheat. Srivastava's confidence could be misplaced.

For now, more than rice, soy in Madhya Pradesh faces a bigger threat from dismal processing. Of the 70-odd soy processing units that once lined the Agra-Mumbai highway that runs through Indore, 50 survive. Half their capacity remains unused.

Against a processing capacity of 22-23 million tonnes, India's total soy crop available at any given point of time for oil extraction is 10 million tonnes. Madhya Pradesh alone can process 12.5 million tonnes of soy, more than the country's entire crop.

"The industry is reeling from unused capacity, lop-sided taxes and lack of a level playing field," rues Rajesh Agarwal, spokesperson and coordinator of the Soybean Processors' Association of India. Seated in a modest office of Premier Industries (India) Ltd in one of Indore's many commercial complexes on Rabindra Nath Tagore Marg, Agarwal is an acknowledged expert on India's soy trade.

"A high turnover, low margin and high tax scenario leads to rampant adulteration," Agarwal says, answering calls in between from organisers of a global edible oil meet who want him to attend. He dismisses talk of soy farmers in Malwa-Nimar switching to basmati like in the Narmada region. "Soy will always remain a preferred kharif crop for farmers in this region because of its low gestation period. The crop has given consistently good prices to growers for the last 20 years." He sees a bigger threat to soy from the state of the processing industry.

Sales tax incentives by the Madhya Pradesh government lured many businessmen into soy processing, leading to excess capacity and swift closures once the incentives lapsed. Nimble-footed units started shifting to neighbouring Maharashtra because of the benign tax structure there. "The soy area in Maharashtra is around 3.8 million hectares, up from 2.5 million hectares a few years ago. Farmers there are moving from cotton to soy, a reason the industry wants to relocate," says Jitendra Singh, a senior manager at the Soybean Processors' Association.

He says new areas in Karnataka, Andhra Pradesh, Uttar Pradesh and Bihar are being explored to grow soy. Ownership of many old soy processing units have changed hands in Madhya Pradesh. Big companies like Adani Wilmar and Ruchi Soy have bought over smaller units.

The closed commodities exchange of the National Board of Trade, housed in the two-storeyed Soybean Processors' Association head office, is another tell-tale sign.

"A few years ago the exchange had a daily turnover of over Rs 100,000 tonnes of soyoil and was teeming with traders. Gradually most of them moved to online platforms offered by national exchanges like the NCDEX and MCX," says the administrative officer of the National Board of Trade. Reports of unethical trading at the exchange prompted the commodities market regulator, the Forward Market Commission, to shut it down.

"Thirty years ago, we shifted from cotton to soy because the returns were high. If any other crop gives me a better return, why won't I shift again," says Kailash Chand Borwane of Sullakhedi village near Indore