Business Daily from THE HINDU group of publications
Tuesday, Apr 10, 2007
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Business Daily from THE HINDU group of publications Tuesday, Apr 10, 2007 ePaper |
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Economy Agri-Biz & Commodities - Oilseeds & Edible Oil Industry & Economy - Excise and Customs Centre may consider cut in palm oil Customs duty Our Bureau
Tackling inflation Secretaries likely to consider revision of tariff values on edible oils at their meeting on Tuesday. Trade fears futures trade in vegoils complex might be suspended.
Chennai April 9 Speculation is rife in the vegetable oil market over the Union Government's next move to rein in galloping prices. This follows a meeting of a group of secretaries scheduled for Tuesday in New Delhi to consider the situation arising out of lower oilseeds crop, rising international market (due to biodiesel demand) and rising domestic prices. Vegoil prices have risen in the last four months. For instance, in the Mumbai wholesale market, groundnut oil prices increased by 10 per cent to the current level of Rs 660 per 10 kg trading lot. Traders are convinced there is a strong upside potential for the market, given the relentless increase in overseas prices.
Upside potential
Crude palm oil rates increased by about 20 per cent in the last three months to about Malaysian ringgit 2,100 a tonne. The Government's response to the price situation is fraught with various possibilities. There is strong belief that Customs duty on palm oil may be reduced further. Currently, on crude palm oil, the basic rate is 60 per cent. Whether duty on soyabean oil (45 per cent peak rate) would also be considered for reduction is a matter of conjecture. It is also likely that the duty reduction may be accompanied by an upward revision in tariff values. Indian tariff values have been artificially pegged lower. Should that happen, the impact of duty reduction on local prices might be diluted.
PDS supply
It is also believed that the Government is coming around to the view that edible oil supplies through the public distribution system should be resumed. It was discontinued in 2001 following a prolonged period of low international prices. It would enable poor consumers to access cooking oils at reasonable prices. There is also apprehension in trade circles that the policymakers might impose quantitative restrictions on stocks. On pulses and wheat, storage limits were set months ago. It may now be extended to oilseeds and oils too.
Suspension of Futures
What seems to concern the trade most is the possibility that futures trading in the entire oilseeds and vegoils complex might be suspended. Currently, futures trading in soyabean oil is going on strongly at Indore's National Board of Trade, while volumes in other exchanges are modest. What the group of secretaries will do remains to be seen; but there is concern in the market that some precipitate action might be taken. One or more of the aforesaid possibilities may materialise, it is feared. On the ground, the fact remains that edible oils are in short supply. Both kharif and rabi oilseed harvests have been below expectation. The country's vegoil shortage for 2006-07 is currently estimated at nearly 55 lakh tonnes, 10 lakh tonnes more than last year's import of 45 lakh tonnes.
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