The Hindu Business Line : Edible oils offer some relief as inflation dogs consumers

Chennai/New Delhi/Mumbai, May 3 The Government may yet win the war against inflation. But for now, prices of essential commodities are certainly holding their ground if official data is anything to go by.

The data released by Ministry of Consumer Affairs show that prices of principal categories of essential commodities such as rice, dal and tea as of May 1 seem to have risen or stayed at the same levels as they were six weeks ago. The reduction is evident largely in the case of edible oils. This is due to the Government slashing import duties on crude edible oil to zero and refined oil to 7.5 per cent as part of a series of anti-inflationary measures.

Duty impact

Speaking to Business Line, Mr Mohit Khattar, President (Marketing), of Chennai-based discount retail chain Subhiksha, said, “The prices of various oils have come down sharply since March. The manufacturers are getting a better deal because of the import duty reduction and consumers are benefiting.”

In Subhiksha, for instance, the price of sunflower oil has dropped by around Rs 15 a litre since March 3. Groundnut oil has seen a drop of around Rs 12.

Retailers that Business Line polled confirmed the reduction in edible oil prices and to a certain extent, in wheat. The price of onions and potatoes show some decline in some cities.

Suryodaya, the 69-year-old neighbourhood supermarket store in South Mumbai, stores around 7-8 brands of oil. Mr Vijay Gala, Manager, said the store expects the prices to fall further, and adds that the consumers, by and large, are not aware of the falling prices. The store would intimate them through an ‘Off’ tag on the packets, he added.

Stock stuck

However, says Mr Siraj A. Chaudhry, CEO, Refined Oils India, Cargill, the sudden drop in prices has led to traders being stuck with their supply of high-priced oils which is choking the system otherwise. “What’s happening is peculiar. There is enough stock but the demand is low. While we are at the peak of our rapeseed/mustard seed season, May-June-July is also when consumption goes down,” said Mr Chaudhry.

With concerns about what action the Government might take to control inflation, including possibly banning futures trading, no one wants to be holding on to stock, particularly in the face of an anti-stocking exercise. But the trade, which would have to “swallow the poison”, is also reluctant to move its earlier stock, explained Mr Chaudhry.

Wheat tab

In the last six weeks, the price of wheat has also come down in certain cities. “It was bound to come down,” said Mr K.K. Kumar, Managing Director, Shakti Bhog Foods. “The year has seen a crop of 560 lakh tonnes, better than last year, and there is surplus wheat in the market, even after the Government procurement of about 160 lakh tonnes. Prices would come down even more if the Government banned futures trading. It’s not business but gambling,” he stated.

Although there is no futures trading of wheat, prices of all commodities get affected, said Mr Kumar, adding that sometimes the trading in a day equals to the supply of a year.

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