25/03/2013 (Business Standard) - With edible oil prices remaining under pressure due to surplus availability from the world’s two leading producers – Malaysia and Indonesia – India’s per capita consumption of cooking oil is set to increase 4.19 per cent in the current financial year.

Price-sensitive low strata consumers that make up about 40 per cent of India’s edible oil demand are set to consume an  additional 0.4 million tonnes of cooking oil this year, increasing its demand per capita to 13.92 kg this year as compared to 13.36 kg in the previous year.

This, along with the continuous focus of the affluent class more on outside foods that are generally rich in oil, would set to raise India’s overall consumption of cooking oil to 17.55 million tonnes this year, a rise of around one million tonnes or six per cent over the figure the previous year.

“We expect India’s per capita edible oil consumption to continue to rise this year in the wake of sustained positive growth in the country’s economy. Also price sensitive consumers continued excessive consumption this year, resulting in higher per capita consumption in the country,” said Dorab Mistry, director, Godrej International and a global voice in edible oil industry.

With estimated crude palm oil (CPO) production between 19.5-19.7 in Malaysia and around 30.5 million tonnes in Indonesia, a large quantity of about six million tonnes of surplus oil is expected to remain available for world consumption for the current year. Large tracts palm plantations in Thailand, Central America, Colombia and Africa would also come into maturity during 2013. As a result total palm oil production in 2013 is set to grow by about 3.9 million tonnes globally.

CPO prices in the benchmark Bursa Malaysia market remained under pressure, quoting at about 2,400 ringgit, and are seen falling to 2,200 ringgit by June-end. Breaching this level would take this price further down to 1,800 ringgit, said Mistry.

The current CPO price is down about 33 per cent during the last two years due excessive supply. Additionally, edible oil availability from domestic sources is set to increase this year despite lower estimated oilseed production. A COOIT estimate puts India’s oilseed output at 25.62 million tonnes during 2013, against 26.02 million tonnes last year, down four percent.

“Favourable climatic condition, however, has increased oil content in seed with an average 42 per cent this year from 38 per cent last year. This would increase overall oil availability from domestic sources to 8.20 million tonnes this year from 8.15 million tonnes last year," said B V Mehta, Executive Director of the apex trade body the Solvent Extractors’ Association (SEA).

Mistry puts India’s edible oil out at 7.1 million tonnes this year, up marginally from 6.8 million tonnes last year.

Still, according to Mistry, India would require record vegetable oil imports to meet its burgeoning deficit. According to him, India’s imports would rise to 10.9 million tonnes to set a new all time high record this year as compared to 10.2 million tonnes in the previous year.

Rising import dependence may escalate India’s swelling current account deficit which has been a major concern for India’s political think tank, he added.