India to Boost Oil-Palm Area to Cut $8.4 Billion Bill.

India, the biggest buyer of vegetable oils after China, plans to increase its oil-palm area more than sevenfold as it seeks ways to lower its cooking-fat import bill of $8.4 billion.

Plantations may cover 1 million hectares (2.47 million acres) in the next five years, from 130,000 hectares now, Farm Secretary P.K. Basu said in an interview yesterday in New Delhi.

“Strategies will be finalized by March for raising output of oilseeds, mainly oil palm,” Basu said. The planned increase in area will help the country augment its cooking-oil production by about 4 million metric tons, he said.

India imports more than 85 percent of its edible oil in the form of palm oil for use in curries and fried foods. Vegetable oil purchases in the year ended Oct. 31, 2010, were a record 9.2 million tons worth 380 billion rupees, according to the Solvent Extractors’ Association of India, helping palm oil to a second straight annual gain.

“The program will cut our edible oil imports and help farmers earn more,” Basu said. The government has identified coastal areas in the southern parts of the country for growing oil palms, he said.

Futures dropped as much as 1.4 percent to 3,812 ringgit a metric ton on the Malaysia Derivatives Exchange, and traded at 3,813 ringgit at 8:55 a.m. Mumbai time. Prices touched a 34- month high on Jan. 4 on concerns inventory in the second-largest producer may have slid to a five-month low in December.

Assured Price

Edible-oil processors may be asked to buy oil-palm fruits from farmers at a minimum assured price, like in the case of sugar cane that is sold to mills at prices set by the federal and state governments, Basu said.

Palm oil has rallied 68 percent in the past six months on demand from the expanding populations of China and India and as rains hindered oil-palm harvests in Malaysia and Indonesia. Soybean oil rallied 43 percent in 2010, a second straight year of gains, on concern dry weather will curb crop yields in Argentina, the largest producer. Palm and soybean oils are direct substitutes.

India purchases palm oil from Indonesia and Malaysia, the biggest producers, and soybean oil from Argentina and Brazil.

Source : businessweek.com