Edible oil makers urge for lifting of futures trade ban on crude palm oil and soy oil on commodity exchanges
13 September 2022- The Solvent Extractors’ Association (SEA) of India, a body of edible oil manufacturers, on Monday demanded lifting of ban on futures trade in soya oil and crude palm oil (CPO) on the commodity exchanges imposed on December, 2021, to ensure risk management and price discovery mechanism.
SEA has stated that the ban on futures trade has deprived importers of hedging their price risks in rupee-denominated soya oil and crude palm oil futures on Indian exchanges.
“In recent months, edible oil importers have faced huge financial losses due to abnormal volatility in international and domestic prices on one side and weakening rupee on the other,” according to a SEA statement. India imports 56% of its edible oil requirements. Russia and Ukraine conflict, and Indonesia, the biggest exporter of palm oil, imposing a ban on exports in May (which was lifted after three weeks) have impacted global edible oil prices.
tating that the analysis of the price behaviour of major edible oil and oilseeds indicate that they have behaved as per the global fundamentals, Atul Chaturvedi, president, SEA, in a communication to the Securities and Exchange Board of India (Sebi), said, “We are of the considered view that futures market is not responsible for edible oil inflation as the same has been proved in the recent run up which had nothing to do with futures market as the same was not operational,”.
“India is a major importer of edible oils and hence the supply demand dynamics in the international market directly impacts the domestic prices,” SEA said. Resumption of futures trade on the commodity exchanges would go a long way in improving the supply chain in edible oils and replenishing buffer stocks which had depleted. It has stated that the move would help tackle inflationary pressures in food. India’s annual imports are around 13-14 million tonne (mt). Around 8 mt of palm oil is imported from Indonesia and Malaysia, while other oils, such as soya and sunflower, come from Argentina, Brazil, Ukraine and Russia.
Earlier, the Central Organisation for Oil Industry and Trade (COOIT) and the Mustard Oil Producers Association of India along with a number of farmer producer organisations (FPOs) have called for lifting futures trade ban. COOIT in its communication to the finance ministry recently had said “harvesting of kharif crops will start in the next few months and many commodities will start coming into the mandis and in the absence of futures markets a reference price isn’t available which will make operating in the spot markets difficult,”.
To curb inflation, on December 20, 2021, Sebi had banned futures trade of wheat, paddy (non-basmati), chana, mustard seeds, soya bean, crude palm oil and moong for one year. Earlier, mustard seed and chana (gram) futures trade were suspended on October 8, 2021, and August 16, 2021, respectively.