India's edible oil production in the current oil year (November 2011-October 2012) is estimated to fall by 4.6 per cent against last year, raising concern of a further price rise in the retail market.
According to the latest estimates of the Central Organisation for Oil Industry & Trade (COOIT), the overall rabi (November-March) oilseed crop for 2011-12 is estimated to fall to 8.79 million tonnes from 9.87 mt last year, with a drop in sown area from 9.72 million hectares last year to 9.07 mha this time. The drop is mainly in rape seed and mustard seed. The kharif crop came to the market at the outset of the current oil year. The two together are estimated to see a drop of the estimate noted earlier.
This is likely to squeeze vegetable oil availability by 400,000 tonnes, at 8.12 mt against 8.52 mt last year. "Domestic oilseed production is likely to fall making oil availability tight in the domestic market. This will cause increased dependence on imported oils. Our edible oil imports are likely to touch a total 10 mt this year, significantly higher from last year," said Ashok Sethia, vice-president of COOIT.
According to COOIT estimates, the import of vegetable oil during 2011-12 is likely to be 9.1-9.4 mt from the 8.67 mt reported in 2010-11.
About two-thirds of the country’s oil refining capacities are already idle — imports remain attractive due to higher costs here. With extra export incentives by Malaysia, edible oil companies are said to be considering increasing the import of refined oil.
“There is about 30 mt of refining capacities and only nine to 10 mt is being utilised,” said Angshu Mallick, chief operating officer, Adani Wilmar. “As the government has not imposed duty on imported refined oils, these imports are likely to increase further, resulting in a further decline in capacity utilisation of refineries.”
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Data compiled by the Solvent Extractors Association of India (SEA) for February 2012 show import of vegetable oils soared from 550,901 tonnes in February 2011 to 875,649 tonnes (872,293 tonnes of edible oils and 3,356 tonnes of non-edible oils), a rise of 59 per cent. Import of RBD Palmolein shot up to a little over 300,000 tonnes from an average of 110,000 tonnes in the earlier three months, noted SEA. Crude palm oil, degummed soybean oil, crude sunflower oil and canola rape oil are among the other imported edible oils.
Praveen Khandelwal, vice-president of corporate strategy at Gokul Refoils & Solvents Ltd, maintained that with a lower production estimate and reduced availability of edible oils, the latter’s retail prices were likely to rise by Rs 2-3 per litre. He also expressed concern at the two per cent increase in the excise duty proposed in Union Budget 2012-13, feared to add to the cost and price burden.