The Hindu Business Line : Effect of palm oil duty hike unlikely to be harsh

Palm oil prices are expected to further shed the gains made in recent days and move below the psychological MYR 1,300 a tonne over the next two to three days this week .

Mumbai , Feb. 15

THE effect on consumer prices in view of the simultaneous action of hike in duty together with reduction in tariff values on palm group of oils is unlikely to be harsh. Open market prices could improve by a modest Rs 600 a tonne.

A hike in customs duty is expected to lend support to weak rapeseed/mustard prices and, possibly, save the Government from undertaking massive price support operations.

With rapeseed/mustard crop harvest round the corner, forward prices for the largest rabi oilseed crop have been considerably weak. Compared with the minimum support price of Rs 1,700 a quintal, forward prices were ruling at about Rs 1,550 a quintal at the bourses and even lower at the cash markets.

Perhaps the most important effect of the latest move would be on international palm oil prices. After gaining around Malaysian ringgit (MYR) 70 a tonne to climb to nearly MYR 1,350 a tonne in the last few days (after Indian Government diluted carotenoid condition on February 4 and on reports of soyabean crop damage in Brazil late last week), crude palm oil futures in Bursa Malaysia on Tuesday lost as much as MYR 25 a tonne to be quoted at MYR 1,309-1,310 a tonne at the close for March and April contracts.

Palm oil prices are expected to further shed the gains made in recent days and move below the psychological MYR 1,300 a tonne over the next two to three days this week as a response to the hike in duty here. The Indian announcement came after the trading hours ended in Malaysia on Tuesday.

The Finance Ministry's decision is widely regarded as a brilliant one that should overall be in the interest of Indian oilseed growers and the domestic processing industry. Merchant-importers have reason to be happy because current tariff values will make refined palmolein imports more viable than before.

However, refiners will have to tighten their belts and compete on merits. Their financial benefit arising out of dilution of carotenoid condition stands eroded to an extent.

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