Vanaspati surges on higher palm prices

Vanaspati prices have jumped by an average 8-10 per cent in the last three weeks on account of higher prices of crude palm oil (CPO), the primary raw material.

Vanaspati prices have increased from Rs 760 (15 kg jar) to Rs 825. The landed price of crude palm oil has gone up from last month's average of $609 a tonne to $675, a rise of nearly 11 per cent.

"The Malaysian oil palm crop is lower this year and, therefore, prices have turned north. Moreover, the large quantity of oil is being diverted towards production of biodiesel in Malaysia, the main exporter of CPO. The demand from India and other countries is also high owing to the lower domestic production of oilseeds", said B V Mehta, executive director of the Solvent Extractors' Association of India.

In 2005-06 oil year (November-October), the country imported 2.4 million tonne of CPO. In the November-March period of the current year, about 1 million tonne of CPO have been imported. The crude palm oil is used in production of vanaspati and refined oil.

"Domestic vanaspati manufacturers use 70-80 per cent of CPO in producing vanaspati and the recent spurt in CPO prices has compelled industry to hike prices", said Jagesh Khaitan, managing director of Amrit Vanaspati that manufactures vanaspati under the 'Gagan' brand.

The import duty on CPO was brought down from 67.6 per cent to 61.8 per cent in the 2007-08 Budget. However, the lowering of duty had little impact as international palm oil prices rose significantly.

Also the domestic production of oilseeds is down. According to third crop estimates (released by the ministry of agriculture last week), oilseeds production in 2006-07 is 23.26 million tonne, 16.8 per cent down from last year's final estimates of 27.97 million tonne.

Farmers in Rajasthan, Haryana and Madhya Pradesh have shifted large tracts of land from oilseeds to wheat and pulses owing to bullishness in these two commodities.