The Hindu Business Line : Edible oil imports unabated despite good mustard harvest

NOTWITHSTANDING the combination of impressive increase in indigenous production and high international prices, edible oil imports into India continue strongly. Arrivals in March were an estimated 2.98 lakh tonnes, as per data made available by the industry's portal Oilmandi.com.

Last month's imports broadly comprised 1.12 lt crude palm oil; 54,600 tonnes of refined palmolein; 16,200 tonnes of crude palmolein; 5,500 tonnes of crude palm kernel oil; 1.02 lt degummed soyabean oil; and the rest crude sunflower oil.

With this, India's oil year 2003-04 imports so far (November 2003 to March 2004) have aggregated 14.51 lt. Interestingly, imports are continuing unabated despite disparity between local and import prices. Even a large rapeseed/mustard crop under harvest has not curbed the propensity to import. At this rate, imports for the entire oil year are projected at about 45 lt.

Most importers are actually caught up in the vicious circle of having to continue to import more in order to be able to pay for their previous imports. With enormous refining capacities built up over the last couple of years in port towns like Kakinada and Kandla, the processing industry's dependence on imports seems to have increased. This is especially true for new units.

It is ironical that despite claims made by trade bodies about the need to dilute the stipulation relating to carotenoid value, large quantities of crude palm oil continue to be imported and cleared. Investigation into how this is happening would be interesting. But the fact remains that continuing large imports substantially weaken the argument for diluting the stipulation.

In addition, contrary to fears expressed by various associations, reduction in customs duty on refined palmolein (from 92 per cent to 70 per cent) has not resulted in large imports of that oil. Refined palmolein constitutes 3 lt or just about a fifth of the total imports.

Obviously, import data do not seem to support the plea for creating a wider duty differential between crude and refined palm oil. In any case, refiners are free to augment their capacity utilization by sourcing their raw material requirement indigenously. Why they keep harping on creation of a wider duty differential is unclear.

Rapeseed/mustard arrivals are picking up momentum. Market inflows are expected to reach six lakh bags a day. Seed prices are in the range Rs 1650-1700 a quintal at the marketing yards. This could put some pressure on edible oil prices in the domestic market.

According to a trade intermediary, demand is sluggish and stocks are building. Imported oil inventory which used to be around 3.0-3.5 lt is currently said to be in excess of 5.5 lt International prices are not showing any signs of weakening. Indian importers may have to rethink their buying strategy.