NEW DELHI: The Centre has authorised five parastatals to import upto one million tonnes of edible oil to boost domestic supply the festive season upto March next year, a move that is expected to trigger an upspiral in the international market, especially for soya and palm oil, two of India's big imports.
The development comes just after global market analysts projected a record eight million imports this year by the country, beating China to the top rank. India is among the world's biggest edible oil consumers and annually imports huge quantities to the tune of some 4.5 to five million tonnes mainly from Brazil, Argentina, Malaysia and Indonesia, leaving it highly vulnerable to the ongoing price volatility in the global market. Imports peak usually during the festive season starting early August. According to official estimates, demand was increasing 4 per cent annually and had touched 13 mt in 2008-09.
The approval for the imports was given by the Cabinet Committee on Economic Affairs (CCEA) and the relevant notification is expected soon. The imports will be made by the STC, NAFED, PEC, MMTC and NCCF, starting as early as this month. Of these, the MMTC and the STC alone are expected to import as much as five lakh tonnes each.
Announcements of substantial edible imports by the government in particular has regularly had the effect of boosting international prices in a marked manner. Traders imported huge quantities of edible oil last year in anticipation of the government hiking up import duties, cut in April to zero for CPO (from 20%) and to 7.5% (from 27.5%)for refined oils , soon after the Budget. That has still to happen, presumably on the back of apprehensions of poor monsoons leading to a domestic oilseed shortfall.
The development forced traders, who imported upto one million tonnes upto March 31, to sell edible oil cheap in the local market, once again impacting adversely on the State's efforts to boost domestic oilseed production. This kharif, on the back of poor monsoons, groundnut acreage has been impacted negatively and overall oilseed acreage has come down. The fate fo the soya bean crop also hangs on hopes of good rains in the next fortnight, which so far seems unlikely.
The decision to allow upto one million tonnes of import with virtually immediate effect comes against a backdrop of projections that, after a six year gap, India is set to outrank China this year as the world's biggest importer, especially in the wake of poor monsoons that is expected to impact adversely on domestic oilseed output. Analysts say that so far, India is in the lead on impports for the first time since 2003, importing 12.6 per cent more oils at 4.5 million tonnes between January and June, compared with China's imports of slightly above 4 million tonnes in the same period.
India's vegetable oil imports are expected by global trade to climb to a record 8 million tonnes for the marketing year ending in October. 2009, up nearly 27 per cent from a year ago. Reacting to this, Malaysian palm oil futures KPOc3 have gained 25 per cent this year and regional traders expect little downside to this, according to online global intelligence site Edible Oil Report. China, on the other hand, has begun to sell its soybeans from reserve stocks on the back of abundant output, analysts expect palm and soyoil markets to see more buying activity from the India, an end July article in the Report said.
Source : The Economic Times