The Hindu Business Line : Fall in RBD, soya oil prices not to hit new PDS scheme

The Centre will continue to operate its newly launched scheme for subsidised distribution of imported RBD palmolein and soyabean oil, notwithstanding the sharp decline in both global as well as domestic open market prices over the last one month.

On Friday, RBD (refined, bleached, de-odorised) palmolein was selling in Mumbai for Rs 47,800 per tonne, as against Rs 55,200 a month back.

Refined soyabean oil was similarly quoting at Rs 59,200 a tonne, down from its July 22 level of Rs 64,800.

In fact, prices were ruling further lower at Rs 47,200 a tonne for RBD palmolein and Rs 58,200 a tonne for refined soya oil on August 20, before recovering in the last couple of days.

The above decline mirrors the fall in international prices, with imported crude palm oil (CPO) currently at $870 a tonne (cost & freight, Mumbai), compared to $1,080 one month ago.

The landed cost of de-gummed crude soyabean oil has likewise come down from $1,370 to $1,250 a tonne.

On August 20, imported CPO and soya oil prices had dipped even more to $820 and $1,191 a tonne, respectively.

subsidised edible oil scheme

Under the subsidised edible oil scheme, launched only late last month, the Centre is providing a flat subsidy of Rs 15 per kg on imported RBD palmolein and soyabean oil channelised through the public distribution system (PDS).

The Centre has directed public sector undertakings — MMTC, PEC, STC and Nafed — to import up to 10 lakh tonnes for this purpose.

The parastatals would be reimbursed Rs 15 for every kg of oil they make available to the State Governments at below open market prices.

There has been some speculation over the last few days on whether the scheme would continue in its present form, given the decline in open market prices since last month.

“If oil is selling in the open market for Rs 60 a kg, it may make sense to give the same through the PDS at Rs 45.

But if open market prices fall to Rs 45, will the Government then sell at Rs 30.

This could even depress oilseed prices at harvest time?” noted an industry official.

implementation

When contacted, a senior Food Ministry official said that the scheme will continue to be implemented.

At the same time, the Rs 15 per kg subsidy formula will not be mechanically applied.

“The subsidy can be disbursed on a moving average basis. There could be months when market prices could be much higher than Rs 60, in which case we could give a higher subsidy and set it off against months where the prices could be way lower than Rs 60. The idea is to make available oil through the PDS at a uniform price of say, Rs 45, throughout the year,” the official clarified to Business Line.

The scheme’s main objective, he added, was to protect domestic consumers and farmers from extreme fluctuations in international edible oil prices. Since January 2007, the average landed price of imported CPO has shot up from $587 to a high of $1,244 a tonne in March 2008, before easing to the present $850-900 levels. De-gummed soya oil peaked to an average $1,455 a tonne in June 2008, from just $680 a tonne in February-March 2007.

The PSUs have so far contracted about 2.9 lt of imported edible oils under the scheme, out of which 1.70 lt have landed in the country and around 70,000 tonnes have been distributed to States.