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M.R. Subramani

Chennai, July 24 On Monday, the Centre cut the import duty on vegetable oils by 5 to 10 percentage points. On Tuesday, the Finance Minister, Mr P. Chidambaram, said the move was in view of rising prices in the global market. Analysts, on the other hand, view the move as one to face the situation that could arise during the festival season.

A look at the price data during the last one year shows that increase in the prices of imported oils has, actually, been lower than edible oils produced domestically. In fact, increase in oilseed prices has been more pronounced than oils. Oilseed prices have shot up between 30 per cent (rapseed/mustard) and 47 per cent (groundnut).

Not surprisingly, oilseeds and edible oils have been one of the main reasons for the rate of inflation ruling firm. For the week ended July 6, the Wholesale Price of Index was 212.6 against 204.2 points on July 21, 2006. During the same time, the index for oilseeds has increased to 214.6 from 167.6, while that of oilseeds to 170.4 from 148.9.

According to Mr B.V. Mehta, Executive Director, Solvent Extractors Association of India, edible oils contribute just three per cent to the Wholesale Price Index. “But the oilseeds and edible oil index is not a true representative of what is happening at the ground-level. The index gives more weightage to groundnut and sunflower, whereas in terms of consumption, these are less,” he said.

The index for groundnut within the oilseeds has increased to 249.7 from 179.1, while groundnut oil is up at 237.1 from 174.4.

A look at the data also reveals another curious fact. Edible oil prices have not increased as in the case of the seeds. For example, groundnut oil prices have increased by around 45 per cent against 47.5 per cent rise in groundnut seeds. Same is the case with other oils.

But more interesting is the fact that prices of imported oils during the period have increased by less than 20 per cent. In fact, only crude de-gummed soyabean oil is near that margin. Its landed price in Mumbai has increased to Rs 46,400 a tonne from Rs 38,704 during the same time a year ago.

In the case of RBD (refined, deodorised and bleached) palmolein, the increase has been 16.15 per cent from Rs 41,671 to Rs 48,400, while in the case of crude palm oil the rise has been eight per cent from Rs 39,292 to Rs 42,500.

“There are three factors, which have helped to keep prices of imported oils on leash. One, the Centre has cut customs duty on edible oils since the beginning of the year thrice. Two, the tariff value, the base price on which customs duty is calculated, has been frozen since August last. Three, the rupee has appreciated about 10 per cent since the beginning of the year,” said Mr Mehta.

Of the 100-odd lakh tonnes of edible oil consumed in the country, imported palm group of oils makes up 30 lakh tonnes, while imported soyabean oil makes up another 15 lakh tonnes. Then, domestically produced soyabean oil makes up another 11 lakh tonnes.

Mr Mehta’s comments are supported by the fact that prices c&f Mumbai have increased 78 per cent (from $478 to $845 a tonne) for RBD palmolein; 81 per cent for crude palm oil (from $448 to $810); 60 per cent for crude de-gummed soyabean oil (from $552 to $882) and 59 per cent for sunflower oil (from $619 to $1,000).

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

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