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G. Chandrashekhar

Mumbai, Sept. 22 The ongoing dispute between Indian importers and overseas suppliers of vegetable oils, particularly palm oil, over alleged non-performance of contractual obligation by the former is by now well-known.

Overseas suppliers are at their wits’ end as several Indian importers have either refused to honour the commitment or have sought extension of time.

This has upset many overseas suppliers and trade intermediaries. Now, Indians are doing the same business ingeniously.

Instead of dealing directly with overseas suppliers, some Indian importers are said to be routing their business through Government parastatals (like the STC, MMTC and PEC) which arrange for purchase and import for and on behalf of their Indian associates.

Peeved at this, a Kuala Lumpur-based firm has sent a representation to these Government agencies (and copies to the High Commission of India in Kuala Lumpur) not to encourage defaulting Indian firms to undertake business through them.

Allowing defaulters to continue to import through Government agencies and using their facilities would be tantamount to the Government of India encouraging unscrupulous importers, the representations has emphasised.

STC, MMTC and PEC have been asked to check the credentials of importers for purchase of palm products from Malaysian and Indonesian suppliers.

To what extent is the representation justified? According to a number of market participants this correspondent spoke to, there is merit in this argument and Indian Government agencies must take cognisance of the representation.

Meanwhile, palm oil market has fallenas if in a bottomless pit.

From the record highs of Malaysian Ringgit 4,000 and above (well over $1,100 a tonne) early this year, the market has crashed to as low as RM 2,200 a tonne ($670 a tonne).

Market watchers believe, some pain may still be left in the palm market in the wake of rising inventory and improved production.

Prices in the domestic market too crashed by as much as Rs 10,000 to Rs 15,000 a tonne in a short span of a few days in July/August.

Those holding large stocks in anticipation of a price rise had to liquidate hurriedly and in the process incurred huge losses. With oilseeds harvest set to begin, arrival pressure is sure to build in the domestic market.

In July this year, world vegetable oil market began to collapse under the weight of market fundamentals.

The artificial prop up of record crude oil prices and speculative funds vanished sooner than many expected, knocking the bottom out of the market. The volume of defaults is estimated at about 2,00,000 tonnes.

As Business Line pointed out on August 13, following the price decline, several Indian importers including well known corporates holding high-priced contracts did not open the requisite letters of credit and overseas suppliers were left holding paper contracts and goods, unable to ship the cargo in the absence of the letter of credit.

The issue of default on overseas business and in turn domestic sale has agitated a number of local traders.

In an ironical twist, the President of an Indian trade association described the news report on defaults as overblown and in the same breath requested overseas suppliers to be lenient towards Indian importers and accommodate them by extending the shipment time.

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

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