Edible oil import likely to fall first time in 7 years on duty hike

India’s edible oil import is estimated to register a fall this oil year (from November, 2017 to October, 2018), first time in seven years. Import of vegetable oils (largely edible oil and some non-edible oil for industrial use) have been on the rise for many years and almost tripled in ten years to 15.4 million tons last year.

In August 2018, imports were up by 11 per cent despite the fall in rupee, which is attributed to the empty pipeline from three months of consistent fall in imports. Even average prices of major oils in international market were at a two-year low. All the factors put together have negated the impact of the rupee fall in August, according to the Solvent Extractors Association (SEA) data. 

While India’s average reliance on import a decade ago was around 50-55 per cent, and the rest was produced in the country, consumer-centric government policies resulted in India’s reliance on oil import rising above 70 per cent. This trend is also expected to reverse this year. 

Oil year in India is from November to October and in the 10 months, imports of vegetable oils in 2017-18 reached 12.28 million tons. Bharat V Mehta, executive director, SEA said that the estimate for this year suggests imports will be lower by 6-7 lakh tons or around 4-5 per cent. Last oil year, the imports were 15.4 million tons.

Despite 11 per cent jump in oil imports in August, the overall trend has reversed largely due to change in government’s policies towards farmers, which has also helped oilseed processors, claims B V Mehta. 

Industry estimate for edible oil consumption in 2017-18 is around 23 million tons, which means the reliance on import will be 64-65 per cent, down from 70 per cent in 16-17.

Atul Chaturvedi, CEO, Adani Agri Business said that increase in import duty has played an important role, and has improved the viability of processing and crushing of edible oil in India. However, due to the duty hike, growth in consumption has also slowed down, which means a lower requirement, and therefore decrease in import. 

Domestic prices are likely to stay firm because of the high import duty and lower rupee. So far, edible oil imports had been rising because the import duty was kept at a level that doesn’t harm the consumers and controls inflationary impact. However, this year the government has increased import duty on refined and crude vegetable oils in four phases to maximum permissible limit under the World Trade Organization norms. Along with it, the Minimum Support Price or MSP on oilseeds have also been increased.