21/7/06 9The Hindu)  -  After wheat, pulses and sugar, it could be the turn of edible oil to receive policymakers' attention. All's not well on the edible oil price front.

Tightening domestic supplies, rising international prices and less than satisfactory domestic kharif crop prospects are seen lending a distinctly upward thrust to the market.

Already, the popular cooking medium, groundnut oil is trading at Rs 520 per 10 kg, while refined palmolein is quoted at Rs 415/10 kg in the wholesale market. Soyabean oil is not far behind at Rs 405/10 kg.

Out of reach


At the retail level, prices are considerably higher. Branded oils are virtually out of reach of ordinary consumers. The impending festival demand duringAugust to October is expected to lend a distinct upward thrust to edible oil prices.

On the international front, the vegetable oil market is turning bullish.

Prices have firmed up in recent days. Crude palm oil is quoted at ringgit Malaysia 1,600 a tonne, that is around $440-445 a tonne c.i.f. India. Soyabean oil, too, is firm at about $550 a tonne c.i.f. India. Forward prices are at least $15-20 a tonne higher. Weakening rupee is another factor to be considered.

Crude on boil


With crude (energy) market on the boil, there is expectation all around that a larger part of vegetable oil will be diverted for bio-diesel purposes in the coming months. Major palm oil producers Malaysia and Indonesia have threatened to reserve a substantial part of their output for bio-diesel purposes. The US is likely to use more soyabean oil and the EU more rapeseed oil for energy purposes.

Although global vegetable oil production is expected to expand by about 4 per cent in 2006-07, demand growth is rated higher, for both food and non-food uses. Several new bio-diesel facilities under construction in different parts of the world are expected to go on stream soon. Funds are sure to play a crucial role in impacting global prices.

Going may be tough


New Delhi is likely to find the going tough in the coming months as far as edible oil prices are concerned. Currently, there may be a smug feeling that prices are under control; but it may not last long. There is hardly any meaningful policy for strengthening the oilseeds and vegetable oil sector.

Oilseeds output continues to remain stagnant.

It should come as no surprise if the Government is forced to reduce the high rate of basic customs duty on crude palm oil from the current 80 per cent.

However, given the tight demand-supply conditions in the country, a reduction in duty may bring only a marginal relief to consumers. Customs revenue will of course be hit.

Little attention


On soyabean oil, the rate of duty is 45 per cent; and there is no scope for any reduction.

In the last several weeks the policymakers were rather busy with the high prices of wheat, sugar and pulses. They clamped restrictions on export as also opened up imports; but paid little attention to the emerging conditions in the vegetable oil market.

Discontinuing edible oil supplies through the public distribution system four years ago was a blunder. It is necessary to restore status quo ante so as to support poor and needy consumers.

On current reckoning, the kharif 2006 oilseeds crop conditions are less than satisfactory, primarily because of the erratic behaviour of southwest monsoon. Although it is premature to put make a realistic estimate of the crop size, indications are that we may harvest slightly less than what was produced in kharif 2005.