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Edible oils to remain dear in 2008
calendar17-12-2007 | linkBusiness Standard | Share This Post:

16/12/2007 (Business Standard) - Demand-supply gap widens despite cut in import duties, hike in MSP. 
 
Edible oil prices proved quite a drain on the lay man’s pocket, unsettling monthly budgets in 2007. The new year doesn’t hold much promise either. 
 
The retail prices of most edible oils witnessed an average rise of 30 per cent on international cues. Globally, the rates have surged by over 80 per cent. For example, prices of refined soybean oil rose from Rs 50 a kg in January to a current level of Rs 70 a kg. Market experts attributed the price rise to supply crunch in the domestic and overseas markets. Pressure on prices built up due to decline in global oilseeds production, especially in the US. 
 
“Globally, oilseeds supply fell short of demand because of their diversion to biofuel making. The rising prices of crude oil, too, has had a big impact on edible oils prices,” Karvy Comtrade analyst Veeresh Hiremath told PTI. He said edible oil prices move in tandem with crude oil in the global market. 
 
“The supply-demand mismatch widened with the increased usage of edible oils for non-food purposes in the global market. This caused domestic prices to shoot up this year,” B V Mehta, executive director, Solvent Extractors’ Association of India (SEA), said. 
 
As a result, the country’s targeted import of about 47.74 lakh tonnes of edible oils became highly expensive. 
 
According to official data, India consumes around 12.5 million tonnes of edible oils annually. However, the domestic output is estimated to be just 72.43 lakh tonnes. 
 
The supply crunch in the country ballooned with the rise in population and increase in per capita consumption. Also, oilseeds yield did not rise significantly to improve supplies, experts pointed out. 
 
The official data shows that soyabean yield has been stagnant at one tonne per hectare in India as against the global average of three tonnes per hectare. 
 
“Oilseeds yield has remained low in the country because new technologies were not given a go. The government is still considering whether to allow them or not. Biotechnology has achieved remarkable breakthroughs in cash crops such as BT cottonseeds. This can be replicated in oilseeds also,” Central Organisation for Oil Industry & Trade (COOIT) Chairman Davish Jain said. 
 
As prices soared, the government took some measures such as cut in import duties. However, the efforts were only partially successful. Import duty on edible oils has been cut by 5-10 per cent and minimum support price (MSP) was increased to boost oilseeds production. 
 
The duty on crude came down to 45 per cent from 80 per cent while the same was slashed to 52.5 per cent from 90 per cent in the case of refined palm oil. The duty on refined soyabean oil was also cut to 40 per cent from 45 per cent. 
 
However, experts believe even if the duty is reduced to nil, edible oils can’t get cheaper unless domestic production and yields are increased. 
 
Oilseeds research centres have not been able to come up with high-yield varieties for the past two years. Thus, the ground situation remains unexciting. 
 
Analysts say consumers will have to shell out more unless the government takes concrete steps to increase productivity and resolve supply issues. Depending on imports to meet the rising domestic demands is a lopsided strategy, they added. 
 
Moreover, the rabi acreage of the current season has also declined due to adverse weather conditions which makes the situation even worse.