Oilseed millers have again urged the central government to impose a 10 per cent tariff on crude palm oil and one of 17.5 per cent on refined palmolein, besides aligning the base of calculation to current prices.
With a huge stock of oilseeds available for crushing and softening of the prices of oilseeds and edible oils in the domestic market, farmers may be discouraged to take up sowing of oilseeds in the ensuing kharif season, they warn.
According to a survey by Capital Line, about 14.5 million tonnes of oilseeds are available for crushing, apart from unprocessed rice bran. If the processing of local seeds is not encouraged through policy measures, including levy of import duty on vegetable oil or an increase in the base rate (unchanged for four years), warn the mills, the ‘carry forward’ stocks may reach alarming levels by the end of the current season, which may discourage sowing in the kharif season.
“Domestic crushers have to bear around 10 per cent Value Added Tax and other duties, while importers do not pay any duty on the import of crude oils. We want a level playing field and this could be done by imposing duty,” said B V Mehta, executive director of the Solvent Extractors Association (SEA).
He said many mills and solvent extraction plants had closed or were on the verge of closure due to the huge disparity in prices. According to SEA data, the stock of edible oils as on May 1 at various ports was estimated at 5,75,000 tonnes (crude palm oil 3,55,000 tonnes, RBD palmolein 90,000 tonnes, soybean oil 65,000 tonnes and sunflower seed oil 65,000 tonnes). This apart, about 6,50,000 tonnes are in the pipeline. The total stock as on May 1 was 1.22 million tonnes, nearly a month’s requirement of the country.
Also, the price of soybean has eased by over 30 per cent to Rs 18,000 per tonne from Rs 26,000 per tonne in May 2009, while that of sesame stands at Rs 51,000 per tonne, down 18 per cent from Rs 62,000 per tonne a year ago.
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“Oilseed prices are ruling lower and the available stock for crushing is huge. As a result, if a farmer has an option, he may diversify to other crops such as cotton,” said SEA Executive Director B V Mehta.
The lean phase of palm oil production is getting over in Malaysia, the leading producer, dampening prices. Also, the expectation of record soybean harvests from major soybean oil producers like Brazil, the US and Argentina is having an adverse effect on prices when the demand for import from India and China is low. “The crash of nearly 18 per cent in crude oil futures so far in May has diminished the biofuel-driven demand for vegetable oils like soybean oil,” said the analysis by Capital Line.
Prices of RBD palm oil slipped in April, though the rate of fall in soybean oil was higher. The average price of RBD palm oil was down 5.11 per cent to Rs 391.96 per 10 kg in April 2010 compared to Rs 413.08 per 10 kg in April 2009.
Crude soybean oil prices in the domestic market fell by nearly 11 per cent to Rs 395.4 per 10 kg as compared to April 2009. The dip was 4.6 per cent in April as against Rs 414.5 in the previous month.
RBD palm oil was sold at a discount of over Rs 150 in January 2009, which came down to nearly Rs 70 in January 2010 and then to almost Rs 20 in April. Looking at the high production of soybean worldwide, soybean oil may be traded at a discount to palm oil in the near term.