Monsoon cheer for oil and oilseeds sector

The year 2003 witnessed benevolent rains and with that the fortunes of the oil and oilseed industry also improved.

The key developments for the industry include near-record kharif crop, hike in minimum support price (MSP) for oilseeds, encouraging rabi sowing and resumption of groundnut oil export after 40 years.

To top it all, despite substantial oilseeds production, the prices of oil have soared!

The industry continued to be mired in controversies due to frequent changes in oil import tariffs and customs duty along with other hindrances such as non-availability of railway wagons and food grade hexane.

The government affected substantial increase in MSP for rapeseed / mustard and safflower seed for rabi 2004 crops to Rs 1,600 and Rs 1,500 from Rs 1,330 and Rs 1,300 respectively.

The increase in MSP would go a long way in encouraging farmers to diversify area from grains to oilseeds and thus ease the problems of raw material shortage for the industry.

The recent positive change in the climatic condition in the Indian plateau has encouraged the sowing of wheat, pulses and oilseeds in last two weeks.

The temperature in the areas under rabi oilseed crops which was above normal until last week is now a little below normal and also sowing areas in Punjab, Haryana and Northern Rajasthan are experiencing rains.

These are conducive conditions for rabi oilseed crop. In the meantime, the Centre for Monitoring of Indian Economy (CMIE) has reported that up to the end-November, about 71 lakh hectare have already being sowed under rabi oilseed crop, compared to 52 lakh hectare last November, a 37 per cent rise.

This year, with the very good price for rapeseed and rapeseed oil and also for groundnut and its oil, farmers are still expanding the area under oilseeds.

The normal area under rabi oilseed crop is about 79 lakh hectare, but this year it appears that area may go up by 20-25 per cent.

Under favourable weather conditions, it is expected that the rabi oilseed crop may increase to 90-95 lakh tonne, comprising 60-65 lakh tonne of rapeseed, 18-20 lakh tonne of groundnut and 7-8 lakh tonne of sunflower and 2 lakh tonnes of safflower seed.

The total oilseed crop of 2003-04 oil year would be in the range of 235-240 lakh tonne compared to 142.4 lakh tonne last year. This would support the domestic industry with better raw material availability and the import of edible oil may reduce at least 10 lakh tonne to 40-42 lakh tonne.

Among other problems, the industry is facing shortage of food grade hexane since last one and half month. With the bumper oilseed crop and the good demand for export of oilmeals, most of the solvent extraction plants are now operating at their optimal capacity.

Also those plants that were not operating in the last three years have commenced operations due to better availability of raw material.

In view of this, the demand for food-grade hexane has increased suddenly, and at the same time an emergency shutdown BPCL and CPCL hexane plants during October led to shortage of food grade hexane.

An industry association is continuously monitoring the hexane needs and has asked petroleum companies to step up production to meet the rising industry demand. All four petroleum companies"�HPCL, BPCL, IOCL & CPCL"�seem have assured to step up their hexane production.

The exports of oilmeals during November doubled to 4.8 lakh tonne compared with 2.4 lakh tonne in November last year. The total exports (April to November) is reported at 10.0 lakh tonne. From December 2003 to March 2004, an additional 18-20 lakh tonne is likely to be shipped.

The total shipment may touch about 28-30 lakh tonne, comprising 20-22 lakh tonne of soybean meal, 4.5 lakh tonne of rapeseed meal. However, groundnut meal export will show a quantum jump and would not be surprised to see its export figure touching 1.5-1.7 lakh tonne.

In an encouraging move, after a span of 40 years, India has once again entered the global market to sell groundnut oil. So far, India has contracted about 35,000 tonne, out of which about 20,000 tonne has already been shipped till December 15, 2003.

It seems, during the current season, India may export about 40,000 to 45,000 tonne of groundnut oil worth over Rs 200 crore. The exports of groundnut oil has supported the price of domestic groundnut oil and not allowed it to crash in spite of the bumper groundnut crop.

This, in turn, has supported the farmers to get remunerative price; rather best price for their groundnut produce. This is also expected to encourage them to further expand the area under rabi groundnut crop. Last month India also exported a small parcel of 5000 tonne of refined soybean oil to the Gulf.

D P Khandelia, president of the Solvent Extractors Association of India (SEA), along with A R Sharma, vice-president, O P Goenka, former president, and B V Mehta, executive director, have urged Rajnath Singh, the agriculture minister, to maintain edible oil prices at reasonable level so that the industry can pay remunerative price for oilseeds to the farmers and government does not have to step in for market intervention operation.

SEA, in its pre-budget memorandum, has requested for a reduction in the carotenoid specification of crude palm oil and suggested a change from the minimum of 500 mg/kg to at least 300-350 mg/kg.