Competitiveness and technical efficiency: Determinants in the groundnut oil sector of India

► Huge inefficiencies exists both in groundnut production and processing sector in India. ► Replacement of old varieties with improved varieties through innovative seed systems. ► Adoption of low cost technologies increase efficiency in production. ► Promotion of oilseed clusters increase efficiency in processing sector. India imports about half of its domestic consumption needs of edible oils. Groundnuts are a major source of edible oils in India. One of the central problems of groundnut production and processing is huge inefficiencies due to an uncertain production environment owing to rainfed cultivation, the low resource base of smallholder farmers and processors, and the low adoption rates of improved technology. This paper addresses critical issues that impair the groundnut sector’s international competitiveness and efficiency. The paper uses primary data collected from Indian farmers and processors of groundnuts to measure efficiency, and it suggests policies for reducing yield gaps and increasing efficiency. Specific policies suggested from the study are (a) the harnessing of improved varieties with attributes like drought tolerance, high oil content, high productivity for large-scale seed multiplication and distribution by public and private agencies; (b) viable village seed banks and seed networks through cycles of post-rainy season seed multiplication to meet the seed requirements in the rainy season and vice versa; (c) adoption of low-cost technologies to increase profitability and reduce risk; (d) oilseed clusters to facilitate scale and scope economies in processing units; and (e) capital subsidies to accelerate technological upgrading to shed inefficiency in the processing sector. The expected gains in efficiency in the production and processing of oilseeds are expected to result in producer and consumer gains which would justify the proposed incentives for seeds and for technological upgrading in the processing sector.