Edible oils prices may go up this festival season

Rising global prices and a sharp fall in the rupee may push up the rates of edible oils by ₹5 a kg this festival season.

Moreover, the Centre has raised the import duty on edible oil to 60 per cent to provide a boost to domestic industry, resulting in costlier imports. As much as 60 per cent of the country’s edible oil demand is imported.

Also, the government has increased the minimum support price (MSP) of oilseeds ahead of the harvest season that begins in November.

The bumper crop expected this kharif season will thus have little impact on prices.

“Domestic prices have already started moving up after the rupee depreciation, and will rise further by ₹3-5 a kg due to strong demand during the festival season,” said a senior executive of an edible oil company.

Imports down

Atul Chaturvedi, President, Solvent Extractors Association of India, said imports of edible oils had come down sharply in the last few months due to the rupee’s depreciation and the higher import levy. However, duty-free imports from SAARC countries such as Bangladesh, Nepal, and Sri Lanka, with whom India has a free trade agreement.

Interestingly, none of these countries is a major producer of edible oil, and the Centre has to act expeditiously, he said at the 22nd edition of Globoil, an annual industry summit.

The government is happy after collecting an additional revenue of ₹30,000 crore from the hike in import duty, he added. However, imports will be down by 0.5 million tonne (mt) due to higher domestic crushing, he said.

The government has set an oilseed production target of 45 mt by 2022 to reduce import dependence. That target looks too ambitious, said Chaturvedi.

Trade war impact

Sandeep Bajoria, CEO, Sunvil Group, and Chairman of the Globoil organising committee, said there some uncertainty in the edible oil trade due to the ongoing global trade war. Shipments are being restricted from exporting countries and consuming countries are refusing to build up adequate inventory.

The margins of domestic refiners have been hit due to a sharp fall in global prices and exporting countries protecting their refining industry by lowering export duty on refined edible oil.

Sathia Varqua, co-founder of the Singapore-based Palm Oil Analytics, said the prices of crude palm oil per tonne will firm up by 100 Malaysian Ringgit to MYR 2,250-2,350 (from current level of MYR 2,150) by the first quarter of 2019 due to a low inventory in consuming countries such as India and China.

The ongoing trade war between China and the US is also expected to push up the prices of soya oil as China imports about 8.50 mt of soya oil and seed from the US, he said.

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