The Hindu Business Line : Sunflower oil unable to command premium

Chennai, Jan. 5 It may be no news to hear that India is one of the largest importers of edible oil. That palm group of oils form a major chunk of imports too may not be news. But the fact is that the Centre’s move to impose 20 per cent Customs duty on soyabean oil has given a new twist to the price behaviour in the edible oils market.

Nov imports

In view of the Customs duty, not a single tonne of soyabean oil was imported in November last year. Surprisingly, 8,000 tonnes of sunflower oil were brought into the country. A look at the landed price of various oils tells the tale.

The landed price, as on January 2, for RBD palmolein was $632 a tonne (Rs 30,500) c.i.f Mumbai. For crude palm oil, it was $542 (Rs 26,200), while for degummed soyabean oil and crude sunflower oil, it was $735 (Rs 35,500) and $755 (Rs 36,500), respectively. The soyabean oil price includes the import duty.

In the domestic market, solvent extracted soyabean oil is quoted at Rs 43,300 a tonne, while sunflower is ruling at Rs 44,000 a tonne.

Rabi crop

What is of concern is that, generally, sunflower oil is at a premium to even groundnut oil as can be seen from last year’s price (see Table). But this year, groundnut oil is being quoted higher than other oils. Of course, rapeseed oil quotes the highest but it is since the crop is expected only after March and rapeseed/mustard is sown as rabi crop during winter.

“Sunflower usually rules higher since it is seen as a healthier option compared with other oils, especialy palm and soyabean. Sunflower oil prices now hover around soyabean oil prices since there is zero duty on its imports. Also, in general, vegetable oil prices have all declined sharply since October, with fall in crude prices,” industry sources said.

“Sunflower seed prices in some places have declined below the minimum support price (MSP) of Rs 1,510 a quintal. We have urged the Centre to impose Customs duty on sunflower and palm oils,” said Mr B.V. Mehta, Executive Director of the Solvent Extractors Association of India.

Soyabean recovery

A delegation of Solvent Extractors met the Union Commerce Minister, Mr Kamal Nath, 10 days ago and he had reportedly assured them to do the needful.

Industry sources point out that the Centre re-imposed Customs duty on soyabean oil since Madhya Pradesh, the soyabean hub of the country, went to polls in December. Soyabean prices, which almost fell near the MSP level, have recovered since then and are curently quoted at around Rs 19,800 a tonne.

Earlier last year, the Centre allowed edible oil imports at zero duty in view of soaring inflation and as part of its efforts to tame rising prices. Vegetable oil prices were on the boil then in view of higher crude oil prices, resulting in the former being used as bio-fuel.

“Soyabean prices have also gained since soyabean oil futures have been revived,” said Mr Mehta. Futures in soyabean along with that of potato, rubber and chana (chickpea) since December 1 have resumed after a bar on trading lapsed. The Centre had suspended futures trading in these commodities in May in view of rising prices.

Lower output

Industry sources point out that sunflower oil prices have dropped to the level of soyabean despite projections of a lower kharif crop. Estimates have put the production at 3.9 lakh tonnes against 5.2 lakh tonnes last year. Similarly, groundnut output estimates have been pegged at 12.6 lakh tonnes against 18.1 lakh tonnes, whereas that of soyabean has been projected higher at 87.9 lakh tonnes against 84.6 lakh tonnes. The Centre estimates soyabean production to be around 95 lakh tonnes.

Vegetable oils have begun to rise again in line with crude’s gain but analysts see a cap to the rise.