India to start oilmeal import soon as domestic production becomes unviable

A large exporter till three years ago, India is losing ground due to high seed and low oil prices, negative crushing parity

Once an exporter of oilmeal, India has failed to meet domestic demand for bird and animal feed, and will soon start importing. Around 15,000 oilseed crushing units have been operating at  20-30 per cent of their capacity of 36 million tonnes edible oil because of negative crushing parity or unviability.

It is cheaper to import refined oil because of high minimum support prices (MSP) fixed by the government and sustained low edible oil prices in the international market. India is currently outpriced by $150 a tonne in the global oilmeal market.

As a consequence, production of oilmeal has remained low. Of around 38.5 million tonnes (mt) of oilseed production in 2014-15 (November to October period), only 26.20 mt oilmeal was procured. Both oilseed and oilmeal production have declined in India, albeit marginally, from 41.7 mt and  27.49 mt, respectively last year.

“Crushing mills in India, therefore, have reduced their operating capacity to the lowest in many years, due to falling prices of oil and meal. Going by the trend, it looks like India will soon start importing oilmeal,” said Atul Chaturvedi, chief executive officer (CEO) of Adani Wilmar,  producer of the Fortune brand of edible oil products.

Lower output of soybean and rapeseed not only led to higher prices in domestic market but a drastic fall in export. Aggressive competition from China and Argentina led to fewer imports from Japan, Iran, Thailand, Indonesia, Taiwan and Vietnam. A ban on oilmeal import by China and Japan’s move to import genetically modified (GM) seed meal have also hit India’s exports.

  From around six per cent share in the world oilmeal market in 2012-13, India’s share was reduced to less than two per cent in 2014-15. India’s oilmeal exports fell 51 per cent to a mere one mt between April and January of FY 2016, compared with 2.05 mt for the same period a year ago.

Data compiled by the industry body Solvent Extractors’ Association (SEA), showed oilmeal exports declined 91 per cent in January 2016 to 17,243 tonnes, the lowest ever. “We might start importing oilmeals, primarily from Argentina and Brazil, soon to supply our domestic poultry and animal husbandry sectors,” said B V Mehta, executive director, SEA.

The edible oil industry has asked the government to reduce import duty to 5-10 per cent from the current 30 per cent on high oil content oilseeds like rapeseed/mustard (canola) and sunflower seed.

“This will have a multitude of advantages viz. reduce import of edible oils, larger availability of oilmeals for local consumption by feed industry and export and increase value addition in India. Further, the oilseeds imports will not have any adverse impact on the farmers as they are protected with an assured MSP by the government,” said Mehta.