It is common knowledge that India is the world’s largest importer of vegetable oils with an annual import volume of 14-15 million tonnes valued at $12-13 billion and that the country faces compulsion to import because domestic production has persistently failed to meet the burgeoning consumption demand.

India’s import basket comprises broadly 8-9 million tonnes (mt) of various palm oils, 3-3.5 mt of soyabean oil and 2-2.5 mt of sunflower oil. The avowed objective of self-reliance in edible oils has remained on paper while nothing much has changed on the ground in recent years despite several practical policy options available.

Overseas suppliers are well aware of India’s dire need to import in order to bridge the supply gap, augment availability and rein-in consumer price rise. Often, there is a concerted effort to ‘talk’ the market up — send out statements of an imminent rise in overseas prices so that India will be more desperate to contract for quantities at existing prices.

Price trajectory

This has been going on blatantly for years. The market has its own price trajectory based on supply-demand fundamentals and does not always behave as touted by influencers. Last year (2023) was a case in point. Indian importers took bullish bets on market prices with utter disregard for commercial intelligence.

No wonder, many players incurred heavy financial losses as the predicted bull run failed to materialise. Indeed, crude palm oil futures on the Malaysian bourse was down 10.5 per cent in 2023. An attempt is seen this year too to talk the market up. It is necessary for value chain participants here to exercise caution about the ongoing hype over palm oil shortage in 2024.

Consider the following data points for 2023-24 based on publicly available credible sources of information: world oilseed harvest to reach record 660 mt (631 mt in 2022-23); soybean harvest to reach a new high of 399 mt (375 mt); record sunflower-seed harvest at 57 mt (52 mt); major vegetable oils production to reach a high of 223 mt (up 6 mt from previous year); palm oil production higher at 79.5 mt (77.5 mt); palm oil consumption to be below production by 1.5 mt; and world vegetable oil consumption to trail production by 4 mt.

The proponents of bullish theory lay much emphasis on the extant El Nino to argue that oil-palm trees will be affected by dry conditions and, therefore, production would be lower. While El Nino is real, it is not a severe one, quite unlike that experienced in say 2015-16. El Nino is likely to end by April. At the same time, La Nina (the opposite of El Nino) will kick-in sometime in the second half of this year. La Nina usually brings more rainfall than normal.

Crude oil prices impact vegetable oil prices via the biodiesel route. Currently, despite OPEC+ production cuts, the world crude oil market is well supplied. Brent has fallen well below $80 per barrel. When crude oil prices soften, discretionary blending of biodiesel takes a hit. So even this factor is not supportive.

It is necessary for Indian importers to be wary of bullish forecasts not supported by credible data. Policymakers in New Delhi too have to be wary. Currently, the government has no clue about the varieties and volumes of various vegetable oils contracted for, their prices, arrival schedule, and so on. Often, New Delhi’s policy interventions fail to achieve the most desired outcomes because such interventions lack data support. It is also likely that the government falls prey to lobby pressure to make untimely changes to the rates of customs duty.

To ensure data-supported policy decision, it is necessary for the government to introduce a system of monitoring and regulation of vegetable oil import. Importers should be mandated to file import contracts with a designated government authority. It will provide policymakers advance information and data relating to imports, prices, type of oil, arrival period, and so on.

The writer is a policy commentator and agribusiness specialist. Views are personal

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