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Indian palm oil imports to rise

NEW DELHI — India's imports of palm oil are likely to increase at the expense of rival soyoil this oil year following a cut in import duty, but a preference for soy among some firms will limit gains, traders said yesterday.

Last week, the government cut import duty on crude palm oil to 20 per cent from 45 per cent, while that on refined palm oil was trimmed to 27.5 per cent from 52.5 per cent to help fight inflation which rose to a 10-month high in early March.

Duty on soyaoil was left unchanged.

Earlier estimates for imports of 4.3 million tonnes of palm oil and 900,000 tonnes of soyoil this oil year to October 31 were now likely to be off the mark, traders said.

"Now India will probably import about 4.6 million tonnes of palm oil and 600,000 tonnes of soyoil," said Sandeep Bajoria, chief executive of Sunvin group, a leading consultancy and trading edible oils firm.

He said that palm oil was about $200 per tonne more expensive than soyoil on international markets last week but this was likely to narrow to $100 in the next one or two months.

Malaysian crude palm oil futures rose 5.3 per cent yesterday as funds piled back into commodity markets after a sell-off last week, dealers said.

Used in products ranging from cooking oil to biofuels, palm oil is about 22 per cent below last month's historic highs of 4,486 ringgit ($1,402) but has begun to turn up after India cut duties.

"Palm oil imports will rise on three counts — prices are low, duty is low, and there is geographical proximity," said Ashok Sethia, president of the Solvent Extractors' Association of India.

"We think palm oil will now constitute more than 60 per cent of total edible oil imports. It will also depend on prices which are currently attractive," he added.

Prices of crude palm oil in the Indian market have fallen by Rs2,000 to 2,500 per tonne after the duty cut to Rs52,500 ($1,300) per tonne, while soyoil has risen by Rs1,600 per metric tonne to 62,700 per tonne.

Rajni Panicker, the Mumbai-based head of commodity research firm MF Global, said the cut in palm duty should eventually lower palm oil prices by around Rs4,000 per tonne.

But he said consumers may not fully benefit as suppliers often increase prices after moves to cut duty.

The landed cost of palm oil in India had fallen by $400 per tonne in the last 20-25 days due to weak international markets.

India consumes around 11 million tonnes of edible oils a year, helped by imports of nearly six million tonnes.

It buys palm oil from Malaysia and Indonesia and soyoil from Brazil and Argentina.

"Soyaoil imports may be 500,000 tonnes to 600,000 tonnes during the current oil year, against last year's level of 1.2 million tonnes," said B.V. Mehta, executive director of the Solvent Extractors Association of India.