The nutritional and economic effects of palm oil trade liberalisation in India: A policy analysis

Abstract

Introduction: The liberalisation of the Indian edible oils sector in 1994 was followed by important increases in palm oil consumption, which is high in saturated fats compared to the oils traditionally consumed in Indian diets, potentially contributing to rising burdens of cardiovascular disease. Taxation, import substitution and other interventions to promote healthier oil consumption have been proposed. Additionally, Indian dependence on palm oil imports has been identified as a challenge for sustainability, contributing to environmental impacts in supplying countries. The main aim of this thesis is to prospectively assess potential policy interventions aimed at promoting healthy, sustainable oil consumption in India. Methods: This thesis uses a mixed methods approach. We combine qualitative analysis of vegetable oils value chains for sustainable nutrition with an analysis of the policy space for the promotion of healthy, sustainable oil consumption. Subsequently, using a macroeconomic model of India, we analyse the economic and nutritional impacts of palm oil tariff changes. Results: We have identified structural characteristics along the value chain that both drive unhealthy oil consumption patterns and create barriers for improved sustainability. These factors concern agricultural constraints, processing industry structure, marketing, branding, distribution and use patterns of palm oil, often driven by competition in an increasingly concentrated sector. There are substantial opportunities to promote healthier, sustainable oil consumption, as well as challenges, given by changing policy priorities, and the involvement of non-state actors. The space for intervention is shaped by the alignment of proposals with policy goals related to self-sufficiency and food security, as well as with the economic interests of key stakeholders, including a corporate sector in rapid transformation whose role is becoming increasingly pivotal. Increased tariffs on palm oil can lead to modest reductions in saturated fat intakes, replacement towards unsaturated fats, small reductions in overall energy from fats and processed foods, and small increases in trans fat intakes. Tariff protection is also associated with aggregate economic losses, as well as sector-specific impacts. The combination of palm oil tariffs with revenue-neutral subsidies on healthier oils slightly reinforces the shift away from saturated fats, without increasing trans fat intakes, and mitigating aggregate and sectoral economic impacts. Conclusion: Differential tariffs on palm oil could potentially be used as an intervention to promote healthier, sustainable oil consumption, as part of a sectoral agenda for sustainable nutrition. However, this approach can involve trade-offs in terms of economic impacts and nutritional side-effects. Adequate compensatory measures could reinforce nutritional benefits, while mitigating some undesirable impacts. This thesis illustrates an approach to food policy analysis which can be applied in other settings, where trade-offs and synergies across economic outcomes and sustainable nutrition need to be considered.