Soymeal prices slump as incentive scheme future remains uncertain

Soymeal prices have shed around Rs 300-400 a tonne since early March because of uncertainty over the continuance of Target Plus incentive scheme for exporters in the new Exim Policy to be announced soon, traders said. Reports of fresh bird flu cases in Vietnam and China are also pulling prices down.

"Meal prices have fallen as most traders feel that if the incentive scheme is withdrawn, the import benefit that they are currently availing would be stopped," said Prem Agarwal, a city-based soymeal exporter.

Soymeal is one of largest exported agri-product earning annual revenues of around Rs 30 billion.

Under the Target Plus scheme, introduced by the commerce ministry in the Exim Policy of 2004-05, any exporter achieving export growth at a specified rate over the previous fiscal is entitled to a duty free import licence.

However, sources said the continuance of the scheme has been strongly opposed by the finance ministry because its misuse has led to revenue loss of Rs 10 billion.

In some cases large companies have purchased entire export orders to claim the licence, which was subsequently used to import duty-free inputs for domestic production.

On Tuesday, soymeal (ex-factory) prices in Indore were quoted at Rs 8,100 per tonne, down Rs 400 since early March. Soymeal prices have also softened due to reports of renewed bird flu cases in Vietnam and China, traders said. Domestic soymeal is currently selling at Rs 8,700 per tonne, against Rs 9,100 in early March.

"Vietnam and China are one of the major buyers of Indian soymeal and demand might be severely hit if bird flu leads to massive killing of chickens in these countries," another meal exporter said.

Meal is a vital ingredient of poultry feed. According to industry estimates, India exported around 568,433 tonne of soymeal in February, of which 90,000-100,000 tonne was to Vietnam alone.

"Traditionally, Southeast Asian nations have been biggest buyers of Indian soymeal because of their preference for soymeal made from non-genetically modified seeds." "However, after the bird flu scare started striking these countries, Indian meal demand has consistently fallen," another exporter said.