KUALA LUMPUR (Dow Jones)--India's soyoil imports may double in the current marketing year to October to around 1.5 million metric tons, rising from an earlier estimate of 900,000 tons due to the government's decision to scrap a 20% import duty on crude soyoil, London-based vegetable oils analyst Dorab Mistry said late Thursday.
The government said Thursday that the import duty on soyoil has been scrapped, but so far it has issued no official notice.
The coming surge in soyoil imports will slow palm oil purchases, which will likely be almost unchanged on year around 5.3 million tons, down from an earlier estimate of 5.6 million tons, Mistry said in a statement.
India's vegetable oil imports are likely to rise to a record high of 7.5 million metric tons in the 2008-09 marketing year, up from an earlier estimate of 7.2 million tons and sharply higher than actual imports of 6.3 million tons in 2007-08, he said.
The government's decision scrap the duty on soyoil will depress local prices of edible oils and oilseeds, much to the detriment of farmers, and increase per capita consumption, Mistry said.
India has scrapped the import duty on crude soyoil at a time when farmers, oilseed crushers, refiners and traders have been petitioning the government to raise import tariffs on all vegetable oils.
Their argument is that the tariff policy is pushing prices of oilseeds to the level of domestic intervention prices, which the government has set in the first place to protect growers.
The tariff cut will lead to anger and resentment amongst farmers, particularly those who now have to now sell their oilseeds below or slightly above the government-set intervention prices, Mistry said.
"In the last one year, edible oils have become the cheapest food item in India from among the costliest. It is even cheaper than good quality rice," he said.
While availability of lower-priced vegetable oils will erode the earnings of oilseed growers, it will increase domestic consumption, he said.
The projected rise in India's imports of vegetable oils of 1.2 million tons in 2008-09 will constitute close to half of the total increase in global demand this year.
Most of the increase in demand in India will be for soyoil and sunflower oil. Mistry forecasts the country's sunflower oil imports at 500,000 tons, up from 30,000 tons last year.
Global vegetable oil prices may still fall despite robust demand in India because supply worldwide is ample, he said.
Crude soyoil will now maintain a premium over palm olein, he said, adding that crude soyoil prices could fall to $550/ton, free on board Argentina, because of an expected rise in soybean plantings this year in the U.S and canola seed in Canada.
Soyoil for May shipment is currently being offered around $660/ton.
Source : The Wall Street Journal