Oil Palm Industry – Not Understood and Utilised to Potential

Consequence to COVID-19, Sri Lanka is now compelled to ban imports, restrict imports or increase import taxes to manage its valuable foreign exchange reserves. Though such short-term actions are timely and inevitable to face a crisis situation, they would invariably cause hardships to consumers, industrialists and eventually to the public.

Long-term and ultimate solution would be for the country to maximise production in industries, where the country has the competitive advantage to do so whilst importing the rest.

In 2018, Sri Lanka’s annual oil and fats imports stood at more than 250,000 metric tonnes (MT). In the same year, the country produced only around 23,000 MT of coconut oil (https://cda.gov.lk/web/index) and 18,000 MT of palm oil.

Accordingly, the national production was a mere 16 percent of the total oil and fat needs of the country. This scenario compelled Sri Lanka to spend over Rs.31 billion worth of foreign exchange to import and bridge the gap of its oil and fat requirement in 2018. A significant proportion of this expenditure, i.e. Rs. 24 billion, had been to import 220,000 MT of palm oil.

Yet, the country has the capacity to produce palm oil as an import substitution strategy and overcome this unaffordable draining out of valuable foreign exchange from the country. The COVID-19 pandemic the world currently experiencing has put further pressure on countries foreign exchange earnings, compelling the government of Sri Lanka to be very cautious in using its much-depleted foreign exchange earnings.

Given the commodity’s versatile nature, palm oil has rapidly become the world’s most widely used vegetable oil, found in a vast range of products from confectionaries and baked goods to cereals, washing powders, cosmetics, milk powders, pharmaceuticals and even as a first-generation biofuel. Nearly 40 percent of the global demand for vegetable oil is met by palm oil and the average per capita consumption of palm oil in Sri Lanka is at around 10kg. A well-established palm oil industry in the country whilst having a vast potential for import substitution could also be used for export development. As per the current oil and fat needs and production of the country, the government has the potential to save up to Rs.31 billion in foreign exchange annually. In addition, since oil palm is a highly economically viable crop to the grower, it could also strengthen the continuously weakening plantation economy in the country, giving the financial capability to enhance worker wages and improve plantation infrastructure.

Countries like Indonesia and Malaysia have widely used this crop in their poverty alleviation programmes by introducing this crop to the smallholders, with the assistance of World Bank-funded projects.

Though the potential benefits from a palm oil industry is enormous towards the economic growth of a country, its progress of development in Sri Lanka is hindered due to multiple reasons. The perception of a few that oil palm plantations impact the environment negatively is one major reason. Unfortunately, what they do not understand is that it is a criticism aimed at countries planting of oil palm after felling of virgin forests elsewhere in the globe.

Hence, obviously this concern is not relevant and valid in the Sri Lanka context since oil palm is grown only under crop diversification programmes in the plantation sector of this country. Arguments that oil palm cultivations are a threat to the biodiversity in different habitats of the country too are not relevant and valid for the same reason.

Among the other issues raised is that oil palm cultivation severely depletes water resources. It is certainly true that each oil palm plant consumes more water. A typical mature oil palm plant on average requires 249 litres of water per day (Naan Dan Jaan Irrigation (C.S.), Israel), whereas coconut requires 130 litres and rubber consumes 63 litres.

However, the requirement per plant must also be balanced against the fact that oil palm requires a significantly lesser number of plants per unit land area than coconut, rubber or tea. As per unit land area, the water consumption of the oil palm crop is lower than in tea and is only around 10 percent higher when comparing with the rubber crop.

Mike K.V. Carr, a Professor at Cranfield University in the UK, has conducted extensive research on water use of plantation crops grown in tropics and has authored many scientific publications, which could be perused for further information on this subject. In addition to such scientific data on water use of plantation crops, we could also analyse the real-life scenario in the vicinity of oil palm plantations.

Malaysia with over 100 years and Sri Lanka with over 50 years of oil palm cultivation have not experienced water shortages that could be firmly attributed to the crop. Malaysia even has excess water to export to other countries. In any part of the country, a dry spell would lead to water shortages, whether or not that area has oil palm cultivations or not. The recent dry spell experienced in Sri Lanka, i.e. January to March 2019, caused severe water shortages even in villages in close proximity to the Sinharaja forest. This is apparently a global phenomenon.

Less forest cover, urbanisation, changes in soil properties, extreme weather, population increase, increase in water consumption, increase in atmospheric temperature, are reasons for drying of water sources, leading to shortages and not any of the crops planted. Actually, plantation crops would be beneficial in mitigating some of the factors identified earlier in this article that lead to water shortages.

All plant species have the capability to adapt to the environment they grow through stomatal apparatus, morphological and physiological characters. If there are soil moisture stress conditions, plant water uptake will invariably be relatively lesser, leading to low growth rates and crop production. Plants would not absorb high volumes of water under water stress conditions as perceived by some environmentalists.

As for any other crop, oil palm too will be absorbing a lesser amount of water under soil moisture stress conditions, leading to low growth rates and crop production. Among the plantation crops grown in Sri Lanka, coconut and oil palm are monocotyledons, having a shallow fibrous root system.

Some argue that seedlings from oil palm cultivations have become invasive, threatening the existence of other plant species in some habitats. However, when investigated, it became apparent that such situations are evident in reservation areas and nearby lands, where wild oil palm plants grow naturally. In systematic oil palm plantations, with regular harvesting of ripen fruits, collecting of fallen fruits and weed management, the chances of oil palm seedlings becoming invasive is very rare.

Even if there is any threat, it is a manageable situation. In areas with high seed fall and poor weed management, it is reported that even rubber seedlings too have become invasive in certain countries (eafrinet@africaonline.co.ke). The lesson to be learnt is not to quote such sporadic events and demand to stop development projects but to request relevant authorities to adopt management strategies to overcome such manageable issues.

Impact on Other Plantation Crops Coconut and rubber growers are of the view that the oil palm is a threat to their industries. In the year 2018, total coconut production in the country had been in the region of 2.7 billion nuts. Nearly 68 percent of this total production had been used for domestic consumption, i.e. cooking, as fresh nuts.

Accordingly, what was left for other coconut-based industries is only 32 percent of the total production. It is also reported that in 2018, from the total coconut production in the country, only a mere 2.4 percent had been used for oil production (https://cda.gov.lk).

However, at approximately 8,000 nuts to produce one MT of coconut oil, to produce 23,000 MT, the nut requirement should be around 6.8 percent of the total coconut production in 2018. Anyhow, this clearly indicates the coconut production in the country is very much inadequate for the production of total vegetable oil requirement of the country whilst catering to the domestic needs and other coconut-based industries.

To bridge the current national deficit of about 200,000 MT of oil and fat, the country will need an additional 200,000 ha of coconut land. If oil palm is used for the purpose, the land extent needed will be only 50,000 ha, since it’s a much efficient crop than coconut in production of vegetable oil.

From a unit area of land, oil palm produces four times more oil than coconut. Further, the chemistry of the coconut oil is such that it cannot be used to manufacture most of the products made using palm oil. In the light of this scenario, the palm oil industry could be supportive rather than negatively impacting the coconut industry in the country, as there will be more nuts available for the coconut-based industries, which will facilitate to earn relatively more foreign exchange to the country and also income to all the stakeholders in the industry.