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THE Centre has authorised five public sector companies to import up to one million tonnes of edible oil to boost domestic supply this festive season up to March next year, a move that is expected to trigger a price rally in the international market, especially for soya and palm oil.

The development comes soon after global market analysts projected a record eight million imports this year by India. India is among the world’s biggest edible oil consumers and annually imports around 4.5-5 million tonnes mainly from Brazil, Argentina, Malaysia and Indonesia. Imports peak usually during the festive season starting early August. According to official estimates, demand was increasing 4% annually and had touched 13 million tonnes in 2008-09.

The approval for the imports was given by the Cabinet Committee on Economic Affairs (CCEA) and the relevant notification is expected soon. The imports will be made by the STC, NAFED, PEC, MMTC and NCCF, starting as early as this month in anticipation of internal demand rising exponentially. MMTC and the STC alone are expected to import as much as five lakh tonnes each.

Traders imported huge quantities of edible oil last year in anticipation of the government hiking up import duties, cut in April to zero for CPO (from 20%) and to 7.5% (from 27.5%) for refined oils, soon after the Budget. That has still to happen, presumably on the back of apprehensions of poor monsoons leading to a domestic oilseed shortfall. The development forced traders, who imported up to one million tonnes up to March 31, to sell edible oil cheap in the local market, once again impacting adversely on the State’s efforts to boost domestic oilseed production. On the back of poor monsoons, groundnut acreage has been impacted negatively and overall oilseed acreage has come down. The fate of the soya bean crop also hangs on hopes of good rains in the next fortnight, which so far seems slim.

India’s vegetable oil imports are expected to climb to a record 8 million tonnes for the marketing year ending in October 2009, up nearly 27% from a year ago. Reacting to this, Malaysian palm oil futures KPOc3 have gained 25% this year and regional traders expect little downside to this, according to online global intelligence site Edible Oil Report.

The decision to allow up to one million tonnes of import with virtually immediate effect comes against a backdrop of projections that, after a six year gap, India is set to outrank China this year as the world’s biggest importer, especially in the wake of poor monsoons that is expected to impact adversely on domestic oilseed output.

Analysts say that so far, India is in the lead on impports for the first time since 2003, importing 12.6 percent more oils at 4.5 million tonnes between January and June, compared with China’s imports of slightly above 4 million tonnes in the same period. China, on the other hand, has begun to sell its soybeans from reserve stocks on the back of abundant output, analysts expect palm and soyoil markets to see more buying activity from the India, an end July article in the Report said.

Traders have pegged palm oil and soyoil imports to range between 300,000 tonnes 450,000 tonnes monthly leading up to Diwali in mid October, compared to 600,000-800,000 tonnes in the first half of the year..The Report article cited analysts’ projections to contend that the rise in demand from India alone wouldl chip away at the seasonal uptick in palm oil output in top producers Malaysia and Indonesia and keep prices, which traditionally decline in this period, well supported. India alone will account for more than 25 percent of the increase in demand for crude palm oil this season, it said.

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