Tariff cut may not fuel soyoil import

India's soyoil imports are not seen increasing in January-February despite the reduction in the base import price of crude soyoil because of disparity with local markets, traders and analysts said on Tuesday. Roughly, the cost of imported soyoil is Rs 357 per 10 kg, while local prices are around Rs 340.

"We do not expect any quantum jump in imports because even after the reduction the price disparity with local markets is still high," Rajesh Agarwal, chairman, Soybean Processors Association of India, said.

The Central government on Monday reduced the import base price of crude soyoil by $13 per tonne to $497 per tonne and that of crude palm oil by $16 per tonne to $417 per tonne.

"Soyoil imports in January might be around 90,000 tonne, up 40,000 tonne from December mainly because of increase in domestic demand and not because of reduction in base price," Agarwal added. India imports around 5-6 million tonne of edible oils annually, with soyoil and palmoil constituting the major chunk of these imports.

Concurring with Agarwal's views, some analysts also feel that after the reduction, there would only be a marginal improvement in soyoil imports because of fewer losses.

"Before the reduction, a trader had to import soyoil at $510 per tonne, while the CIF rates were around $480 per tonne, now that difference will hardly come down to $20 per tonne," an analyst with a Mumbai-based brokerage firm said.

Currently, the CIF prices of crude soyoil are around $477 per tonne and the revised base import price has been fixed at $497 per tonne.

"This anomaly should be fixed immediately as traders have to pay a higher duty while they are not getting adequate returns by selling the oil in local markets," B V Mehta, executive director, Solvent Extractors Association, said.

Many analysts also feel that the government cannot undertake steep reduction in import base price at the cost of hitting the local crushing industry.

The reduction in the import base price of crude soyoil would have no affect on soyoil futures in the coming days, as the market seems to have factored in the reduction, traders said.

"Soyoil futures have been below Rs 340 per 10 kg on the near-month contract for the last week in anticipation of cut in import base price, hence no more downside should be expected," a city-based trader Abhishek Malpani said.

Tuesday, on the National Board of Trade, January refined soyoil opened at Rs 338 per 10 kg and rose to Rs 339.60 by noon.

"This clearly shows that the market has discounted the cut in import base price," another trader said.

Analysts said most edible oil traders were expecting a hefty reduction in import base price because of a drop in international rates.

"The whole edible oil complex in the international markets is looking bearish in the medium-term mainly because of quantum jump in soybean stocks in the US and bumper rapeseed production in Canada and Australia, therefore this reduction was on the lines," another Indore-based trader said.

Conversely, a section of traders feels that now that the market has discounted the tariff cut factor, prices in fact might see a slight rally.

"NBOT January futures might move up Rs 342 during the next few sessions," another trader said.