20/05/2008 (Reuters, India), Jakarta - India, the world's No. 2 importer of vegetable oils, is looking to buy 1.5 million tonnes in the next three months starting from May to stock up for the festival season, a top industry official said on Tuesday.

Roughly 80 percent of the shipments will be made up of palm oil while the rest is soyoil as importers take advantage of palm oil's relatively lower landed cost, said B.V Mehta, executive director of the Solvent Extractor's Association of India.

"Demand will start rising from May and peak in July since the domestic crushing season already ended and retailers need to prepare for festivals starting in August," Mehta told Reuters ahead of a three-day conference on the global palm oil industry.

Rising festival demand for edible oils, mainly for sweetmeats and pastries, will bring vegetable oil imports to 5.8 million tonnes in the oil marketing year ended October 2008.

But imports during the year will have only risen by 3.6 percent from last year as soaring prices of vegetable oils push price-sensitive Indian consumers to hold back, Mehta said.

"Higher vegetable oil prices have squeezed the market a little," he said. "The poorer sections of Indian society are consuming less but the ever-growing middle class are willing to fork out out more money for food."

Palm oil, mostly shipped from Malaysia and Indonesia, is around 21 percent off a record high of 4,486 ringgit per tonne in early March. Rival soyoil at the Chicago Board of Trade fell 15.5 percent from a record level 71.26 cents per pound in March.

Soyoil imports from Argentina and Brazil compete with palm oil for Indian demand.

However, the Indian government's decision in April to raise local supplies by getting state-run firms to import one million tonnes of edible oils may keep shipments buoyant, Mehta said.

"Palm oil will be virtually dominant in the government's drive to buy that large quantity of edible oils and this is due to the complete restructuring of palm oil duties," Mehta said.

India scrapped import duties on soyoil and palm oil, cutting them to zero percent in March, while reducing refined palm oil products to 7.5 percent as part of a widespread effort to cool rising food prices.

As a result, Mehta added, India will now look to buy 200,000 tonnes of refined palm oil products in May-October period, effectively replacing the market share of hydrogenated fats.

Domestic oilseeds production is expected to rise slightly to 28 million tonnes in the next November-October oil year as farmers may focus more on oil seed crops following surging prices and good monsoon weather, Mehta said.

India's annual monsoon rains, vital to its economy, are forecast to reach southern India a few days earlier in May, the government said last week. [ID:nBOM148764]

The monsoon usually hits the southern Kerala state on June 1 and retreats in September, impacting the output of soybean and groundnut, which is sown during the period.