* India plans $1.5-bln boost to oil palm cultivation
* High prices, govt support lure farmers in some pockets
* But shortages of water, seedlings limit expansion
* Imports seen little affected, even after expansion drive
DWARAKA TIRUMALA, India, Sept 23 (Reuters) - Tractor convoys
trundled thousands of oil palm seedlings to new homes on farms
across southeastern India this month, as the world's top
importer of edible oil rolls out an ambitious $1.5-billion plan
to boost output.
Record prices of palm, and new government promises of
payouts even if Indian prices slump, are driving the effort,
which aims to lift domestic output sharply within a decade from
a tiny level now.
"The return on oil palm will at least be double that of rice
and banana, and it is far less labour-intensive," said B.
Brahmaiah, one of the hundreds of farmers nationwide who are
racing to switch from the usual staple crops, such as rice.
Brahmaiah, 37, owns a six-acre (2.4-hectare) plot in the
West Godavari district of Andhra Pradesh state, where fertile
soil, ample water and oil processing mills promise to be a
strong driver of higher production.
Nestling amid verdant ricefields are forest-like clumps of
oil palm, coconut, and cocoa plantations, watered by plentiful
supplies from the region's rivers and canals.
Elsewhere, though, regular watering is just one of many
obstacles to achieving a target of a 10-fold output expansion
within a decade, ranging from a shortage of seedlings to a
four-year growing term before palm trees produce fruit.
A national Mission on Edible Oils launched last month aims
to boost output to 2.8 million tonnes by nearly tripling the
crop cultivation area to 1 million hectares (2.4 million acres),
so as to curb oil imports, which exceeded $11 billion last year.
Ravi Mathur, who heads the Indian Institute of Oil Palm
Research, the government-backed body driving the campaign, said
it had identified 2.8 million hectares (7 million acres)
suitable for palm cultivation.
Apart from Andhra Pradesh, these areas include the
mountainous northeast and the remote islands of Andaman and
Nicobar, where a price premium of 2% is on offer to farmers so
as to match rates for produce in less isolated areas.
Green groups have criticised the push, saying it could lead
to water scarcity, reduce forest cover, and hit biodiversity,
but Mathur dismissed these fears as unfounded, saying
authorities would protect the environment from harm.
Still, planting all 2.8 million hectares (7 million acres)
with palm will be a major task, as the thirsty plants need
regular, profuse supplies of water, a scarce commodity in India,
where agriculture relies on annual monsoon rains.
Another barrier to the switch is that oil palm requires up
to four years to yield sellable fruit, unlike rice, cotton or
pulses, which can be harvested in less than six months.
That constricts income flows for farmers, said Sougata
Niyogi, a top official at India's biggest palm oil producer,
Godrej Agrovet Limited.
The government plans to make up some of the cost by offering
29,000 rupees ($394) for each hectare of new palm cultivation,
and help with planting other quicker-growing crops on farms.
It will also guarantee a viability price for fresh fruit
bunches, paying the difference if market rates fall below that
That assurance should hasten oil palm plantings, said B.V.
Mehta, executive director of trade body Solvent Extractors'
Association of India, as price volatility was previously a major
deterrent for growers.
YEARS BEFORE INCOME FLOWS
Even with such assistance, few small, cash-starved farmers
will be able to wait years for income to come in, Godrej's
Farmer O. S. Chalapatha, who planted oil palm on a 35-acre
(14-hectare) plot more than a decade ago, said his earnings from
a job with a private firm initially helped defray costs.
"In the first few years, a huge amount was required to
develop oil palm plantation," he told Reuters.
"I managed to arrange it, since I was employed in a private
company. But it is not possible for everyone."
Also shaping as a critical threat is a shortage of palm
Palm nurseries in India and southeast Asia, which normally
need up to a year to expand production, have been overwhelmed by
the surge in seedling demand for the drive.
To reach its target of 1 million hectares under oil palm by
2025/26, India must add 130,000 hectares (321,000 acres) every
year, calling for millions of seedlings.
"India needs 18.6 million seedlings, but local supplies are
limited to 1 million," said an industry official in the
financial capital of Mumbai, who sought anonymity.
"For the rest, we are dependent on imports."
Godrej plans to import 1.15 million sprouts this year, up
from 450,000 last year, to meet farmers' demand, Niyogi added.
The shortfall leaves first-time producers unable to start
"We are willing to pay three times more than government-set
prices, but we are not able to secure seedlings," said another
Andhra Pradesh farmer, T Malddiramaiah.
A longer term challenge for India is setting up oil mills to
press the fruit once it is ready, so as to avoid spoiling.
Such infrastructure is scarce in the northeast, where
congested roads and limited supplies of fertiliser already
strain supply chains.
That leaves just a few pockets of producers, such as those
in Andhra Pradesh, to rise to the challenge, which suggests a
dent in huge imports is unlikely.
For all its efforts, India may not be able to produce more
than 2 million tonnes of palm oil by 2029/30, when demand is
expected to have risen another 5 million tonnes, said a leading
edible oil refiner.
"India will remain import-dependent in the foreseeable
future," said the refiner, who asked not to be identified. "Oil
palm and other programs can only reduce some incremental growth
But on his farm in Andhra Pradesh, Brahmaiah has his eyes
firmly fixed on the prize.
"Oil palm is more profitable than other crops once it starts
yielding," he said.
(Reporting by Rajendra Jadhav; Editing by Gavin Maguire and