India’s role in the global trade arena presents a unique juxtaposition of economic opportunities and self-reliance challenges. In this intricate fabric of international commerce, India grapples with the complex dynamics of coal and edible oil trade. While it boasts abundant resources, it simultaneously faces persistent import trends. This article explores the significance of coal and edible oil in India’s trade landscape and the strategies employed to balance dependency with growth.
Foundations of Trade
International trade hinges on the principle of comparative advantage, where countries leverage their technological strengths and natural resources for exports. However, India encounters a distinctive challenge. It not only imports commodities it naturally lacks, such as crude oil and gold, but also imports items abundant domestically, like coal, and those with the potential for self-sufficiency, like edible oil. Coal and edible oil together constitute a significant portion of India’s merchandise imports, making up 36% of the total basket valued at $714 billion.
The Indian Commodity Challenge
India, despite being the world’s second-largest coal producer and possessing the fifth-largest coal reserves, imports a substantial 254 million tonnes of coal in FY23. This is primarily due to the need for low-ash content coal for thermal power and steel production, while domestic coal contains higher ash content. With increasing power demand and steel production projections, coal imports are set to rise in FY24.
Edible Oil Dependency
India’s large population and lower per capita income intensify the demand for affordable edible oil. Approximately 55-60% of this demand is met through imports. Palm oil constitutes the majority of edible oil imports, followed by soybean and sunflower oil. However, challenges in oil palm cultivation and processing hinder self-sufficiency. The cultivation area for oil palm is limited, and processing mills are hesitant to set up without substantial cultivation nearby.
Policy Strategies
To tackle the commodity pressure from coal and edible oil, the government has implemented growth strategies. For coal, the approach includes increasing production, efficient allocation, and domestic coal utilization. Initiatives like coal mine auctions and commercial coal mining have boosted coal production. Programs like SHAKTI and Mission Coking Coal aim to meet power demand and reduce import dependence, while additional coal washeries are set to lower ash content.
For edible oil, the National Mission on Edible Oils – Oil Palm (NMEO-OP) is committed to expanding cultivation areas and boosting palm oil production through price assurance and input assistance for farmers. The plan also involves the establishment of new oil palm mills, especially in regions like Arunachal Pradesh and the Andaman and Nicobar Islands.
Managing Commodity Pressure
These strategies align with comparative advantage and aim to harness the potential of abundant resources and favorable conditions. They complement primary policy actions by establishing coal washeries, prioritizing power plant allocation, and enhancing rail networks for coal transportation. Input incentives to oil palm farmers supplement NMEO-OP’s efforts.
