Edible Oil prices to come down.

KOLKATA: Narendra Modi will not have to worry much about cooking oil prices that are crucial in determining the food inflation numbers. From January to May, prices of crude sunflower and soybean oils have tumbled by almost 10%. And now with rupee strengthening, edible oil prices are expected to come down further from July.

But a possible El Nino effect may impact pulses production in the country and it may lead to higher imports of the commodity. Angshu Mallik, chief operating officer at Adani Wilmar, said: "Prices of edible oil have been witnessing a downward trend since January. For instance, since January price of crude sunflower oil has come down from Rs 68-70 a kg to Rs 62-63 in May - a drop of almost 9%. Similarly, crude soybean oil prices have declined from Rs 66 a kg to Rs 60 in the same period. We have already passed this benefit to our customers."

Mallik added that if rupee continues to remain strong, then edible oil prices will not be a matter of worry for the new government. "The oil that the industry is importing now will be available in the market in early July. During that time, consumers may get an additional Rs 2 a kg relief on cooking oil." Rupee was seen at 58.37 on Monday, an 11 month high since June 2013.

India is expected to import 11 million tonne edible oil in the current oil year (November 2013 to October 2014) vis-a-vis 10.4 million tonne in the previous year. Domestic consumption is increasing at a rate of 3% to 4% annually in India.

BV Mehta, executive director, Solvent Extractors Association (SEA), said: "A strong rupee will definitely help bring down prices of imported edible oil. But rupee is volatile now. It should become stable for the consumers to get the real benefit. What we need to do now is to reduce our dependence on imported oil. We expect that the new government should focus on increasing the domestic production and the productivity of oilseeds in the country." The country imports edible oils worth Rs 60,000 crore annually. However, a strong rupee is a disincentive to exporters of castor oil and oilmeals from India.

"The oilseed industry exports products worth of Rs 25,000 crore annually.

A strong rupee will bring down forex earnings," Mehta added.

Pulses are another important items that are imported by India. Unlike cooking oil, a strong rupee will not have much impact on the pulses prices in the country. KC Bhartia, director at Indian Pulses & Grains Association, said: "Earlier this year, hailstorm and untimely rains had affected rabi crops. Now there is a fear of an EL Nino effect on the kharif crop. This means that import will increase and the prices of pulses will remain firm. There is a feeling in the industry that the new government might give more emphasis on increasing production of pulses and reduce dependence on imports. But in any case, pulses prices will remain firm this year." India imports pulses from Canada, US, Australia, Myanmar and South Africa.

Source : economictimes.indiatimes.com