GS Paper - 3 (Economy)

The Union Cabinet on 18 August 2021 approved a new Rs 11, 040 crore mission to boost domestic palm oil production, highlight of which was a MSP-type mechanism for ensuring a bench mark assured price to farmers along with deficiency price payment through DBT. The decision comes after the Prime Minister announced the new central scheme on 15 August during his Independence Day speech at Red Fort.

What

  1. Under the new assured price mechanism, the government said that it will give a price assurance to the oil palm farmers for their Fresh Fruit Bunches (FFBs).
  2. FFBs are those from which palm oil is extracted by the industry. This will be known as the Viability Price (VP).
  3. This VP shall be the annual average CPO price of the last 5 years adjusted with the wholesale price index to be multiplied by 14.3 per cent. This will be fixed yearly for the oil palm year from 1st November to 31st October.
  4. This assurance will inculcate confidence in the Indian oil palm farmers to go for increased area and thereby more production of palm oil. A Formula price (FP) will also be fixed which will be 14.3 percent of CPO and will be fixed on a monthly basis.
  5. The viability gap funding will be the VP-FP and if the need arises, it would be paid directly to the farmers’ accounts in the form of DBT.
  6. It further said that the assurance to the farmers will be in the form of the viability gap funding and the industry will be mandated to pay 14.3 per cent of the CPO price which will eventually go up to 15.3 per cent.
  7. The Indian Council of Agriculture Research (ICAR) has identified that around 2.8 million hectares of land in the country is suitable for oil palm cultivation of which just around 0.9 million is in North-East India which won’t be used by cutting standing forests or shifting farmers from other crops.