The Hindu Business Line : Centre may crack the whip to lower edible oil prices

The measures
Centre mulls a further reduction in customs duty on imported oils.
Andhra Pradesh may place an embargo on sale of imported oil until groundnut crop is harvested.

G. Chandrashekhar

Mumbai, Nov 2

Speculation is rife in the oilseeds and oils market over the possibility of the Government taking some precipitate action to bring down high prices of edible oils. Despite rebound in the kharif 2007 oilseeds crop (estimated at 165 lakh tonnes versus last year’s 130 lakh tonnes), there is no respite for consumers from high prices of edible oil.

Possibilities

In the international market, palm and soya oils have surged to record highs — over $900 a tonne. The Centre is reportedly weighing various options to rein in internal prices. Possibilities that are under consideration including suspension of futures trading in edible oils; ban on export of edible oils, especially groundnut oil; and ban on export of oilseeds (mainly, handpicked selected groundnut kernels); and a further reduction in customs duty on imported oils.

States demand

New Delhi’s dilemma is compounded by the fact that at a time when kharif oilseeds harvest has begun, some States have demanded a ban on sale of imported oils.

A minister from Andhra Pradesh is on record suggesting the State would not be averse to placing an embargo on sale of imported oil until harvest of the groundnut crop is completed. Gujarat is also reportedly considering some restrictions on sale of imported oils to support oilseed prices.

Indeed, oilseeds prices this season are much higher than they were last season.

Soya price

For instance, despite a record production of 94 lakh tonnes, soyabean is today offered at Rs 15,000 a tonne, as compared with Rs 12,000 a tonne this time last year. Groundnut in-shell too is high at over Rs 400 per 20 kg lot versus around Rs 350/20 kg last season.

Traders are mopping up all the early arrivals. Arrival pressure may develop after Diwali. Market participants believe, going forward, there is a little scope for a major downward correction in oilseeds and edible oil prices.

Govt’s eagerness

If the Government is keen to be seen supporting oilseed growers, then it would be disastrous to ban exports. On the other hand, consumers surely deserve some relief from current high prices.

This can happen through a combination of duty reduction and/or suspension of futures trading; or duty reduction accompanied by hike in tariff values.

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