Vegetable oil imports likely to increase 7%

The country's vegetable oil imports in 2007-08 (October-September) are likely to be around 5.9 million tonnes, up 7.2 per cent against 5.5 million tonnes last year, due to lower carry forward stock of oilseed and rising oil consumption, said B V Mehta, executive director, Solvent Extractors' Association of India.

"Imports are likely to rise in every quarter this year," Mehta said.

Last year, the country had 3.5 million tonnes of mustard seed carry forward stock, while at the start of the current oil year in October, it was left with only 150,000 tonnes, he said.

Mehta also said India's import ratio of palm oil and soyoil in the current oil year is likely to be 80:20, from 67:33 a year ago, on account of high prices of soyoil and a sharp rise in freight duty.

The country imports nearly 50 per cent of its annual edible oil needs of close to 10 million tonnes in the form of palm oil from Malaysia and Indonesia, and soft oils like soyoil from South America.

In 2007-08, oilseeds production in India is estimated at 25-26 million tonnes compared with 24 million tonnes last year, Mehta said.

"However, total availability of oilseeds this year will be lower due to a sharp decline in carry over stock," Mehta added.

Also, rabi output is expected to fall below 9 million tonnes this year, from 9.5 million tonnes achieved in the previous year, mainly due to lower mustard seed crop, Mehta said.

"Mustard seed output is seen lower (this season) due to unfavourable cold wave and ground frost conditions in northern India, and 11 per cent decline in acreage," Mehta said.

According to Mehta, mustard seed output this season is likely to be around 5-5.5 million tonnes, down from 6.2 million tonnes a year ago.

On Monday, Rajasthan government announced an Rs 126 crore relief package for farmers whose crops have been damaged by frost and extreme cold weather. The desert state contributes around 35-40 per cent of India's total mustard output.

India has two oilseed crops in a year. Kharif crop is sown in the monsoon season from June and harvest starts in October, while rabi crop is planted in the winter months beginning in November and harvested from March.

Mehta said kharif output of oilseeds was high this year, mainly because of a bumper soybean crop. However, in terms of oils, yield from soybean was low, he said.

Budget expectation
Market reports say government may reduce import duty on edible oils by 10-15 per cent in the upcoming Union budget, to give relief to consumers from high prices.

However, industry officials are of the view that compared to global prices of oils, which have risen by more than 100 per cent over the last one year, local prices have gone up only 25-30 per cent.

Moreover, the local price rise has been neutralised by government freezing base prices of oils for more than a year.

Base prices are used to calculate the tariffs importers pay for their purchases.

"Any cut in edible oil duty will hurt domestic farmers," Mehta said, echoing the industry's opinion.

Crude palm oil carries a 45 per cent import duty, while duty on soyoil is 40 per cent.

However, effective duty on crude palm oil and soybean oil is only 17 per cent and 18 per cent, respectively, due to freezing of tariff for crude palm oil at $447 a tonne and for soyoil at $580, nearly half the prevailing global prices, Mehta said.

"Even if the government cuts import duty, effective duty would be 11-12 per cent only, and the overall price reduction may be just Rs 2.50 a kg," he said.

Hence, in reality, the consumer will not benefit much. Also, as the market is very volatile currently, impact of the duty cut will be wiped out within a few days with the producers hiking prices, he added.

"Government should withdraw value added tax, rather than cut import duty on edible oils," Mehta said.

Withdrawal of the 4 per cent VAT on edible oil will directly help consumers and farmers in India, he said.

If government wants to help poor sections of the society, they could distribute edible oils through the public distribution system at subsidised rates out of the revenue generated from import duty, he said.