With the rupee’s record low making imported commodities costlier, vegetable oil importers have started renegotiating prices of their products with their Indian buyers.
The Indian currency has fallen 22 per cent since August to close at 53.71 against the dollar today. The fall has not only nullified the impact of a fall in crude palm oil prices on Bursa Malaysia, but also raised the cost of imports of the widely traded oil.
Indian consumers, on whose behalf importers contract with foreign suppliers, were refraining from taking deliveries as the rupee depreciated sharply in the last few days. Similar disputes had occurred in early November, when the rupee had fallen sharply. The fluctuation changes the cost between the time of placing the order and the delivery. This leads to disputes.
Since August, the price of crude palm oil has fallen 11 per cent in dollar terms to trade at $948.98 a tonne yesterday, compared to $1,067.12 a tonne on August 1. Similarly, the commodity has witnessed a marginal fall of 3.74 per cent in the Malaysian currency, to close at ringgit 3,022.5 a tonne yesterday as compared to ringgit 3,140 a tonne on August 1.
In rupee terms, however, all edible oils have risen between 15 and 20 per cent during the five-month period under consideration. Imported crude palm oil is refined and then blended with other refined edible oils, including mustard, soy and groundnut. “This is a common practice which keeps happening,” said B V Mehta, executive director of the Solvent Extractors’ Association, a Mumbai-based trade body representing around 1,000 traders and processors across the country.
As a result, vegetable oil imports have declined consistently since September. Total imports fell from 912,341 tonnes in September to 894,045 tonnes in October and further to 855,363 tonnes in November. Siraj Choudhary, CEO of Cargill India, the producer of edible oil brands Gemini and Sweekar, said, “A falling rupee would make vegetable oils costlier.”
“Crushing activity is very low today, as mills await a clear global economic guidance which may determine the price movement of edible oil,” said Satyanarayan Agarwal, president of the Central Organisation for Oil Industry & Trade. Domestic vegetable oil producers are facing both crushing and import disparity to the tune of Rs 1,000-1,500 a quintal and, hence, activity by domestic mills has declined tremendously in the recent months.
