India’s veg oil imports hit a record high in Aug; SEA proposes hike in import duty

 The Dollar Business Bureau | @TheDollarBiz India’s imports of vegetable oil have skyrocketed to 13.3 lakh tonnes in August 2014, which is up about 76% from year-ago levels and the highest volume imported in a single month since India allowed oil imports under the Open general License (OGL) in 1994. The Solvent Extractors' Association of India (SEA), which has around 875 veg oil companies as members, says that the previous highest monthly veg oil imports was seen in January 2013 at 11.6 lakh tonnes. Despite low production of soybean in India this year, low global prices and burgeoning stocks in key vegetable oil exporting countries, Malaysia and Indonesia, continue to spur imports by India. The FAO vegetable oils sub-index declined for the fifth month in a row in at 166.6 points in August, down 8% from the previous month and the lowest level since November 2009. “Much of the August decline reflects the pattern of palm oil prices, which have weakened under the combined effect of improved production prospects in South East Asia and lower than anticipated import demand, primarily from China and India," says FAO.

Source - Solvent Extractors' Association of India (SEA)

However, demand remains strong in India, which has imported around 95.25 lakh tonnes of vegetable oil during November 2013 – August 2014 (up about 8% from the corresponding period in the previous year) with import of soybean oil surging to 350,373 tonnes in August 2014, the highest in any single month since1994. Crude vegetable oil accounts for the bulk at 89% of total veg oil imports by India due to higher demand for crude soybean, sunflower and canola oil, which account for around 32% of the total crude oil import. Higher imports have resulted in low veg oil prices in India which have declined for five of the last six months, according to Ministry of Commerce stats. However, imports are forecast to further increase in the coming months and this may lead to some undesirable consequences, says SEA. SEA said that the nil duty on palm products by Malaysia effective from September (from $38 in August) and expected nil duty by Indonesia from October (against current duty of $66) will put more pressure on domestic prices in India in the coming months and may hurt farmer interests with the next kharif harvest expected in five - six weeks. SEA has proposed a sharp increase in import duty on vegetable oil. It said, “There is urgent need to support the farmers by increasing import duty on crude vegetable oils from 2.5% to 10% and refined vegetable oils from 10% to 25%, (which is) the only viable option.”  

This article was published on September 15, 2014.