Low crushing by mills and nil import duty may act as trigger.
Vegetable oil imports may rise by over 10 per cent this oil year (November 2009-October 2010) on low domestic production and higher consumption. The industry estimates imports to be at 9.5 million tonnes (MT) during the current year as compared to 8.6 MT last year.
However, last year, domestic vegetable oil industry had forecast imports to be at 7 MT, which was revised later to 7.5 MT, much lower than the actual figure of 8.6 MT. This year, too, the early forecast may be revised upwards on growing per capita consumption and low availability from domestic sources.
BV Mehta, executive director of the Solvent Extractors’ Association (SEA) attributes the record high import forecast to low crushing from domestic sources, nil import duty which makes import cheaper than locally produced vegetable oils and the stronger rupee against the dollar.
Due to a stagnant domestic production of 6.5 MT over the past several years, the local output is estimated to decline significantly this year as a majority of small and mid-size local crushing units have not yet begun the season. At the same time, the bigger ones are operating with very little capacity.
According to an estimate, over 65 per cent of the crushing capacity remained unutilised, especially in the current season which otherwise should be fully operational. This is further leading to an increase in import demand to meet the rising consumption, an analyst said.
Meanwhile, each tonne of seeds crushed by local mills attracts a loss of Rs 1,000 a tonne due to higher seed but low oil prices. Until the government levies import duty, vegetable oil prices will continue to remain under pressure.
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At the same time the government may not consider levying any duty to add to the alarming food inflation rate of over 19 per cent.
Meanwhile, vegetable oil imports jumped 36 per cent to 753,966 tonnes in November as compared to 555,342 tonnes in the corresponding month last year.