MUMBAI: Before the Union Budget was announced there was two sets of conflicting demands from the oil seeds industry. One group wanted the customs duty to be retained at the present levels while the other group wanted to curb imports by raising customs duty. Already, some media reports hint at the alarming increase in edible oil imports. India is set to dethrone China as the leading edible oil importer this year.
According to import data compiled by the Solvent Extractors Association of India (SEA) import volume has risen by 79% to record 5,83,864 tonnes in the first eight monts of the oil year beginning in November 2008-09. It has termed it as unusual. The import figure during the corresponding period in the previous oil year was 3,567,123 tonnes.
Import during June’09 is reported at 780,679 tons compared to 593,730 tons for June’08 i.e. up by 31%.
”The large scale unabated import in last few months and no action taken in Union Budget to impose import duty coupled with low prices will encourage larger import in coming months. The erratic monsoon and likely lower kharif oilseeds crop will further push the import in Sept/Oct months and overall import likely to be about 80 lakh tons ( 75.0 lakh edible oil + 5.0 lakh non edible oil) for the current oil year ending Oct’09 compared to 63.0 lakh tons import during last year,” laments SEA.
There are two major reasons why government is not keen on curbing imports ---one is the weak monsoon which could hamper domestic oilseeds production and second the need to control inflation of which prices and availability of oilseeds are a vital factor.
The inflation for the week ended June 11, 2009 based on the whole sale price index was -1.17%. Index for Primary articles whose weightage is 22.02% rose marginally on account of higher pries of food articles suh as fish-marine (9%), fruits and vegetables (3%), condiments and spies, maize and rice (1%).
On the other hand Food products that come under the manufactured products group with a higher total weightage of 63.75% declined marginally by 0.1%. The index for 'Food Products' group declined by 0.4 percent to 233.0 (Provisional) from 234.0 (Provisional) for the previous week due to lower prices of imported edible oil (6%), oil cakes (2%) and rice bran oil and gingelly oil (1% each). However, the prices of gur and groundnut oil (1% each) moved up.
Hence it can be seen that rising vegetable oil imports have curbed inflation to a great extent as it is one of the essential commodities used in Indian households
The weak monsoon and approaching festival season from August onwards in many parts of the country will put further pressure on domestic supplies and prices. Analysts have already forecasted a lower crop for oil seeds in general especially crops in Rajasthan and Madhya Pradesh.
While there has been criticism of allowing large scale imports by the Indian government, it is also a fact that China now has abundance of soybeans thanks to the huge reserves it built up through imports and stockpiling by the government.
International vegetable oil prices are once again sliding down to November ’08 level (when market had crashed) heading for bearish scenario. Favourable weather condition in the U.S. Midwest as well as weaking trend of vegetable oil prices on the world market and plummeting crude mineral oil prices are contributing to price setback in international and domestic market. This makes import of vegetable oils quite attractive for India and could also be seen as an opportunity to bolster up its reserves as China did.
Meanwhile, India’s imports will be happy news for palm oil producers in Indonesia and Malaysia who have witnessed increase in prices by 25% this year as against the usual trend of declining prices during this period.
SEA Data on Imports
Import of Refined Oil during Nov.’08 to June’09 is reported at 818,595 tons (15%) compared to 205,199 (7%) and Crude Oil is reported at 4,714,482 tons (85%) compared to 2,891,357 tons (93%) for the same period of last year.
Import of Palm & Soft Oil:
Palm products are dominating with import share nearly 4/5th of the total import. Import of Palm Oil in first eight months (Nov’08-June’09) is reported at 4,387,722 tons compared to 2,732,411 tons. Soft Oil is reported at 1,145,355 tons consist of 438,000 of sunflower oil and 660,500 tons of crude soybean oil compared to 364,145 tons during the same period of last year.
Import of Non-edible Oils: Down by 38%
Import of Non-edible oils in first eight months (Nov’08-June’09) is reported at 290,787 tons compared to 470,567 tons during the same period of last year i.e. down by 38%, thanks to higher import & domestic refining of CPO, leading to better availability of P.F.A.D. & C.P.S.
Protectionism through import curbs may turn out to be counter-productive as government may not be able to control inflation in the face of tight supplies of essential commodities. On the other hand, the world looks towards India’s production of food grain staples—including rice, wheat and ofcourse sugar as they have a major on international supply and prices.
Source : Commodityonline.com