04/11/05 (Bloomberg) -- India, the world's third-biggest soybean oil buyer, may import 18 percent more of the edible oil this year as lower prices and tax make it more attractive for traders than rival palm oil, a trade body said.

Imports may rise to 2.3 million metric tons in the year ending Oct. 31, 2006, from an estimated 1.95 million tons, said Sandeep Bajoria, president of the Central Organization for Oil Industry and Trade. Palm oil imports may stay unchanged at 3.2 million tons, he said.

An increase in Indian soybean oil imports may mean higher prices for the commodity in Argentina and Brazil. U.S. soybean oil prices have risen 10 percent this year on the Chicago Board of Trade. Palm oil prices in Malaysia have risen 4 percent.

``Rising demand from India will definitely give good support to cash markets in Argentina and Brazil,'' said M. Somasekhar, an analyst at TransGraph Consulting Pvt. Prices of crude soybean oil in Argentina may rise to $510 a ton by end of this month from $447 a ton at present, he said.

The base import price, used by the government to calculate the import tax, for crude soybean oil has dropped to $513 a ton from $628 a ton in May last year. The benchmark price, meant to prevent traders from paying a lower import tax by understating edible oil rates, is usually revised every fortnight.

The import tax on soybean oil is 45 percent, half of that on palm oil, as per World Trade Organization rules.

Fried Food

The lower tax has helped increase soybean oil's share of India's total edible oil imports to 40 percent in the 11 months ended Sept. 30, from 21 percent a year earlier. Palm oil accounts for 60 percent, down from 79 percent last year, according to the Solvent Extraction Association of India, which represents 800 oilseed processors.

Soybean oil imports more than doubled to 1.8 million tons in the 11 months ended Sept. 30, from 801,220 tons a year ago, the Solvent Extractors Association said last month. Palm oil imports fell 10 percent to 2.77 million tons.

India's soybean output likely rose 5 percent this year to 6.12 million tons from a year ago as rainfall eased dry weather in the biggest growing states, Soybean Processors Association of India said in October.

That may not damp demand for imported soybean oil as rising incomes boost consumption of fried food, said Somasekhar. Edible oil consumption in India may rise 6 percent to 12 million tons in the year ending Oct. 31, 2006, he said.

Rainfall

India's economic grew an average 6.1 percent in the past nine years, helping double the per capita income to 20,862 rupees ($475), according to government figures. Soybean oil is used in cooking and as salad dressings.

India, the world's third-biggest soybean oil user, received 879.3 millimeters of rainfall in the four-month season, about 99 percent of 892.5 millimeters, an average between 1941 and 1990, according to the India Meteorological Department.

The area planted to soybeans rose to 7.67 million hectares (19 million acres) this year from 7.2 million hectares a year ago, according to the Soybean Processors Association. The oilseed is a monsoon crop, which is harvested starting October.