STC eyes global edible oil trade

In an ambitious initiative which could make State Trading Corporation (STC) one of the world's largest traders in edible oils, the company said Wednesday it is planning joint venture partnerships with global players to import, export, store and market the commodity.

"We intend to set up joint venture or ventures on a 50:50 basis to import all kinds of crude oil, store them in facilities here, sell it to refiners, export it to the vanaspati manufacturers in neighbouring countries and even market refined oil in consumer pouches", STC managing director, Arvind Pandalai told CRISIL MarketWire.

He said the plans were for the joint venture(s) to begin with handling of around 10 per cent of India's import volumes and reach 25 per cent in an year.

Since India is world's largest importer of edible oils buying around 4.5-5.0 million tonnes annually from abroad, the total volumes handled by STC's proposed venture could rise to 1.2 million tons in an year.

Pandalai said oil pricing was the key which STC was negotiating with prospective partners abroad as it had to be the most attractive to compete effectively at global levels.

He did not divulge the name of the possible partners but said the deal could be with one company or a consortium of companies to impart greater flexibility to the proposed venture.

STC already has a storage facility in Bombay and setting up of more such facilities near the ports is in the pipeline.

Oil will be stored in tanks near the ports and depending on the requirement it could be sold both within the country and abroad at prices which will be fixed on a daily basis.

He said the idea is to be a "captive seller" who can provide oil to buyers at the shortest possible time.

It will be of particular benefit to small refiners who cannot afford to import oil on their own but could easily make purchases of even 50-100 tonnes from the joint venture. Crude palm oil could also be sold to vanaspati manufacturers not only in India but even Nepal and Sri Lanka.

Another option available was to get the imported crude oil, refined near the ports and market it in consumer packs.

"Refined oil could be sold under STC's own brand name or under that of the joint venture. We will market it jointly and share the profits", he added.

Pandalai said in any case once the oil was there with the company it could be hedged in the international market to mitigate risks.

STC's edible oil imports touched an all-time high of 744.76 crore rupees in 2003-04 up from 170.81 crore rupees in the previous fiscal.

It mainly imports soya oils from Argentina and Brazil and palm oils from Indonesia and Malaysia.