By Rajendra Jadhav
MUMBAI (Reuters) - The value of Indian imports of edible oils and pulses is set to plummet as international prices drop and domestic output climbs in the wake of heavy monsoon rains, helping save the country around $4 billion as it struggles to narrow a gaping current account deficit.
That nearly equals the amount the government aims to save in its high-profile battle to restrict gold imports, a key part of its efforts to stem the deficit that has pushed the rupee to a record low and threatens higher inflation as the economy grows at its slowest pace in a decade.
Lower demand from the world's No.1 importer of pulses would pile more pressure on prices that have fallen nearly 20 percent so far this year. Edible oil prices would also be hit at a time when palm oil supplies are rising.
"The demand for imported pulses is very weak. Traders are struggling to sell imported stocks despite reducing prices," said Nitin Kalantri, a miller based in Latur in the western state of Maharashtra.
Industry officials estimate India could save nearly $3 billion from imports of edible oils this year and $1 billion on pulses. In the 2012/13 financial year, which ended on March 31, India's edible oil imports stood at a record $11.31 billion, while it spent an all-time high of $2.34 billion buying pulses overseas.
GRAPHIC on India edible oil, pulses imports
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Above-normal rainfall since the beginning of the monsoon season on June 1 promises bumper production of edible oils and pulses, used in dishes from samosa to curries. The ingredients account for nearly two-thirds of the country's imports of agricultural commodities.
"Last year pulse imports rose due to lower production of chana," said Kalantri, referring to a local name for chickpeas -the most popular pulse in India.
"This year chana production has jumped and many importers burned their fingers due to sharp drop in prices."
The price of the essential commodity fell 42 percent in a year as output jumped 15.3 percent in 2013 from a year ago to 8.88 million tonnes.
The country bought 4 million tonnes of pulses in 2012/13, mainly from Canada, Myanmar and Australia.
Imports of other pulses such as pigeon peas, black matpe and green gram are also set to drop, with more land being used to cultivate these crops due to the plentiful rainfall, said Vedika Narvekar, a senior analyst with Angel Commodities Broking.
The area devoted to pulses stood at 9.33 million hectares as of August 15, up 25 percent from a year ago, farm ministry data showed last week. Oilseeds were cultivated on 18.34 million hectares, against 15.89 million hectares a year ago.
FALLING OIL PRICES
The value of Indian imports of edible oil is set to decline due to a sharp drop in prices, although quantities are likely to remain steady. Falling prices for palm oil will have a big impact as the ingredient accounts for more than 70 percent of the country's imports of edible oil
"Edible oil imports are likely to stand around $8 billion to $8.2 billion in the financial year considering the current trend," said Nalini Rao, an analyst at India Infoline Ltd. That would be down from an estimated $11.31 billion in 2012/13.
Edible oil imports in April to June fell by nearly a quarter from a year ago $2.27 billion, commerce ministry data showed.
"We started the financial year with a bumper rapeseed crop. Now output of soybeans, groundnut and other oilseeds seems good. So there will be some drop in edible oil imports in FY 14," said a senior official with a leading edible oil company based in Indore in the central state of Madhya Pradesh.
"In overseas market edible oil prices have fallen by 20 to 25 percent. That drop will be reflected in this year's imports," said B.V. Mehta, executive director of the Solvent Extractors' Association of India (SEA), which maintains edible oil imports data for the marketing year running from November to October.
In July India imported crude palm oil at $806 per tonne, down 20 percent from a year ago, while it paid $955 for crude soybean oil, down 24 percent from last year.
India is aiming to contain its deficit at $70 billion for the fiscal year ending in March, or an estimated 3.7 percent of gross domestic product, well below the record 4.8 percent in the previous fiscal year.
(Reporting by Rajendra Jadhav; Editing by Joseph Radford)