The Hindu Business Line : Soya oil importers may gain from strong rupee

Mumbai May 11 Soyabean oil importers are set to make a clean profit of around Rs 4,000 a tonne or nearly 10 per cent of the landed cost because of the sharp appreciation of the rupee and firm domestic prices.

Import contracts were made at prices between $675 and $740 a tonne c.i.f India. Currently, customs duty on soyabean oil is 45 per cent; but the rate will be calculated on the tariff value of $580 a tonne, much lower than the market price.

That will make the landed cost of the material inclusive of duty and incidentals at about Rs 41,000 a tonne. Currently, crude soyabean oil is traded in the domestic market at Rs 44,000 a tonne.

When refining cost of Rs 2,000 a tonne is added, refined soyabean oil ex-factory will be at Rs 43,000 a tonne. The current market price of refined soyaoil here is Rs 47,000 a tonne. A clean profit of Rs 4,000 a tonne.

Cumulative profit

Huge arrivals, estimated at about 5 lakh tonnes of crude degummed soyabean oil - mainly from South America (Argentina), are expected in the next few weeks. Several ships are on way to the country. The cumulative profit on 5 lakh tonnes imported soyabean oil will be Rs 200 crore.

Is there a case for raising the tariff value on soyabean oil? There already are apprehensions in market circles that the government may raise the artificially low tariff value on imported edible oils.

If the Government is serious about containing edible oil prices, there is one more way. The duty difference between crude palm oil (50 per cent) and refined palmolein (57.5 per cent) should be abolished or considerably narrowed so as to encourage greater inflow of refined oils which will help quickly augment supplies and help check price rise.

A section of the trade is of the view that supplies of imported oils are controlled by large groups of importers and refiners; and that the benefit of lower duty and stronger rupee is not being passed on to the consumers. If the customs duty on crude and refined oils is unified, it will create a level playing field for both refiners and traders, which in turn will benefit consumers, argued a trading house representative.

Temporary fix

By keeping the tariff value on imported oils artificially low (frozen since July 2006), the Government may have done a smart job; but such things can only be a temporary fix, and not a permanent solution. Sooner it changes the better. If need be, basic duties should be lower even further. Imports of various oils during November 2006-March 2007 aggregated 14 lakh tonnes. April imports are an estimated 4.3-4.5 lakh tonnes . inclusive of one lakh tonnes of soyabean oil and 40,000 tonnes of sunflower oil. In other words, in the first six months of the oil year 2006-07, arrivals are 18.5 lakh tonnes maximum.

May, June and July are traditionally low oil consumption months because of summer season, especially in northern India. But consumption rises manifold during August-October period because of festivals.

Even assuming import of 5 lakh tonnes a month, during May-October period, a total of 30 lakh tonnes would arrive. For the whole oil year, therefore, imports would be about 48-49 lakh tonnes or maximum 50 lakh tonnes.

Continued high domestic prices have already led to some demand compression, especially in rural areas where incomes have not been rising because of poor agricultural growth. The Government has failed to come to the help of the really needy sections of the population. The Centre has quietly passed the buck on to State governments.

The onset of southwest monsoon and its progress will have to be closely watched. There is likely to be little respite from high global prices.

More Stories on : Oilseeds & Edible Oil | Exports & Imports | Forex

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Oriental Bank plans to raise tea sector lending

ITC, Cargill, AWB buy over 5 lt wheat

`Low' forms but drives heat into TN, AP coasts

Shrimp hatcheries, farms unite to improve quality

Fertiliser pricing — Time to scrap the archaic scheme

Spot rubber prices unchanged

Nod for closed tea gardens' financial package soon

`5 Bengal tea gardens will be reopened shortly'

Moderate fall in Kochi tea prices

SBI in pact with Heritage Foods

Soya oil importers may gain from strong rupee

Increasing exports

Declining trend continues in pepper

Growth plan

Seminar on pest management