The Hindu Business Line : Wholesale prices of edible oils drop sharply

Price fall: The wholesale price of mustard oil has come down to Rs 68 per kg from Rs 80 a kg as the Government scrapped import duties on edible oils to rein in inflation. The wholesalers are however complaining about huge trade loss due to the sudden policy decision leading to price drop.

Our Bureau

Mumbai, April 1

Wholesale prices of edible oil across the country moved sharply down on Tuesday on panic selling following the Government’s decision to scrap import duty on crude edible oils.

On an average, prices came down by Rs 5,000 per tonne in Mumbai. In Indore soy oil dropped from Rs 595 to Rs 536 per 10 kg trading lot.

The move, traders said, surprised the industry as the last reduction in duties happened less than a fortnight ago; also international prices have been falling. The Mumbai commodity exchange did not record prices of edible oil on Tuesday, say sources. Many traders have suspended their operations.

The market sentiment was further weakened by fears that the state governments may impose storage restrictions.

According to analysts, zero per cent duty on soya oil would translate into a reduction of between Rs 4,000 and 8,000 per tonne in the local market. The retail prices of refined oils are expected to come down by Rs 3-5 per kg, said traders.

“The impact of duty reduction in the case of palm oil will be Rs 3 per kg. The market is highly volatile due to a recent report of the United States Department of Agriculture on the soyabean crop prospects this year. We will wait for the markets to stabilise and take a decision after a week on reducing the prices,” said a trader.

Refined soy oil in Mumbai markets had risen by Rs 70 to Rs 620 per 10 kg in the last three months, while refined palm oil rose by Rs 60 to Rs 574 per 10 kg over the same period.

On Monday, the Government scrapped import duty on crude edible oils and reduced the import duty on refined oils to 7.5 per cent.

“The duty reduction was a big surprise, it would be against the interest of farmers in the long term,” said Mr Dinesh Shahra, Managing Director, Ruchi Soya Industries Ltd. The international cues also favoured a downward correction in prices, said traders.

Futures hit

The Government move impacted the commodity futures market.

Opening on the bearish note, prices of soyabean, soy oil and mustard on NCDEX fell sharply to their lower circuit of four per cent. Trading in the commodities was suspended for 10 minutes. When trading resumed there were few buyers as many expected prices to drop further.

Soyabean for April delivery closed lower by 4 per cent at Rs 2,087 per quintal against Rs 2,173.50 per quintal, while May delivery of mustard seed was also locked at the lower circuit of 4 per cent at Rs 530 per 20 kg against Rs 552 on Monday.