Importers mix up to 30% of the material to maximise gains.
Faced with margins squeezing to “nil” because of rising minimum support price (MSP) of oilseeds and falling refined edible oils in global markets, local importers make handsome gains by blending “olein” — a cheaper alternative — with almost all edible oils.
Although blending olein with edible oils is illegal, almost 80 per cent — equivalent to the oil consumed in loose form — sold in the country contains about 30 per cent olein which is the liquid fraction of palm fruit which can be a severe health risk even to the level of cardiovascular disease. Branded edible oils constituting about 20 per cent of an estimated 13.5 million tonnes of the country’s total consumption, has been so far kept away from such blending.
But, as the branded edible oils are sold at a premium of 10-15 per cent over loose oil, the commodity is not preferred by consumers in rural areas.
| OIL FLOW Import of refined and crude edible oils (tonnes) | |||
| Refined | Crude | Total | |
| Nov ’08 | 137959 | 381073 | 519032 |
| Dec ’08 | 128540 | 590585 | 719125 |
| Jan ’09 | 142066 | 714624 | 856690 |
| Feb ’09 | 62612 | 667482 | 730094 |
| Total (Nov ‘08 - Feb ‘09) | 471177 | 23,53,764 | 28,24,941 |
| Total (Nov ‘07 - Feb ‘08) | 71315 | 14,41,380 | 15,12,695 |
| Source: SEA | |||
It makes economic sense, says B V Mehta, executive director of the Solvent Extractors’ Association (SEA), a 1,000-member body engaged in promoting edible oils in India.
Blending 30 per cent of olein makes refined oil cheaper by 12 per cent which is much higher than the industry’s average margin of 2-3 per cent. Therefore, barring a few national-level branded edible oils, almost all including the state and district-level brands are available in blended form which is a matter of serious concern, said Mehta. With the practice initially started with a couple of local traders, it has spread across the country resulting in a dramatic rise in imports of edible oil.
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The latest SEA data recorded 68 per cent spurt in imports of vegetable oils at 2.95 million tonnes in the first four months of the current oil year (November - October) as against 1.76 million tonnes in the corresponding previous period . The import of crude oil surged alarmingly by 46.45 per cent to 2.82 million tonnes from 1.51 million tonnes in the period.
“The sharp rise in vegetable oil imports can be attributed to the dramatic fall in international and local prices leading to higher stockholding and consumption. However, low domestic prices have caused the resistance of the farmers to sell their oilseeds. This has affected working of domestic industry during peak crushing season,” said an analyst with one of the largest research firms.
Late last month, SEA wrote a letter to the Ministry of Consumers Affairs and the Ministry of Commerce to apprise them with the unfair trade practices.
The price of most edible oils are ruling at a very low level. RBD olein has become the cheapest oil in the market and is being sold at Rs 320 per 10 kgs, pulling down the price of all other edible oils. Compared to February 2008, groundnut oil is down 27 per cent to Rs 525 per 10 kgs, rapeseed oil lower by 18 per cent to Rs 485 per 10 kgs and soyoil by 29 per cent to Rs 430 per 10 kgs. Sunflower oil has witnessed the steepest fall by 48 per cent to Rs 405 per 10 kgs.
“The unethical blending pushes the honest manufacturers to the brink and the industry along with the government should strongly oppose this malpractice as this does not benefit any one,” the SEA letter said.
The MSP of groundnut in shell was raised by 35.5 per cent to Rs 2,100 per quintal for the kharif season 2008-09. The same for sunflower seed was hiked by 46.7 per cent to Rs 2,215 per quintal and soybean by 48 per cent to Rs 1,350 per quintal.