17/06/2008 (Hindu Business Line), Chennai - Edible oil prices could tend to increase in the next couple of months as traders and refiners cut their inventories due to stock limit imposed by various State Governments. This is seen as the one that could affect the Centre’s plans to control soaring rate of inflation that is hovering nearly nine per cent.

A proof of the shape of things to follow is the decline in imports during May. According to the Solvent Extractors’ Association of India, imports of edible oils declined 39 per cent in May to 3.02 lakh tonnes (lt), while that of non-edible oils nearly halved to 1.15 lt. It is for the second consecutive month that vegetable oil imports have declined.

Stock limit
“One of the major reasons for imports to decline is the stock limit imposed by various State Governments. This has led to fears of harassment by officials,” said Mr B.V. Mehta, Executive Director of Solvent Extractors’ Association.

Under the stock limit, traders and refiners can hold only one month’s requirement with them. Any disruption in shipment of imports or even internal trasnsport could compound the demand-supply scenario.

“The fall in imports is surprising since it is a lean period,” said Mr Mehta.

A surprising feature of the data for May is that imports of even crude palm oil declined by 27,000 tonnes to 2.65 lt.

“Even imported oil comes under the purview of the stock limit once it is handed over to the refiner or trader by the importer,” Mr Mehta said.

Disparity
The other reason for the fall in imports is the disparity between crude palm oil and the degummed soyabean oil. Soya oil prices, in particular, have gained in the last few months on fears that the area under soyabean may come under corn and farmers’ strike in Argentina which has led to supply problems.

As a result, the landed price of crude degummed soya oil is Rs 59,500 a tonne against Rs 51,000 for crude palm oil. In fact, the former is even higher than RBD palmolein, which is quoted at Rs 58,200 a tonne.

Crude palm oil price has increased by 55 per cent since the same period a year ago, while that of degummed soya oil has gone up 71 per cent. Even month-on-month, the rates have increased nearly four per cent for crude palm oil and 5.5 per cent for soya oil.

In the domestic market, barring linseed oil, prices of all vegetable oils have increased by 1.37 per cent (castor oil) to 14.77 per cent (rapeseed oil).

High landed costs
In view of the disparity with crude palm oil and problems in Argentina, soya oil imports during April-May were a meagre 7,000 tonnes against 2.11 lt during the same period a year ago. Besides soyabean oil, imports of sunflower oil have also totally dried up in view of the high landed costs. Landed cost of sunflower oil is around Rs 85,000 a tonne.

“Maybe, imports could have also come down because of consumers’ resistance to higher prices,” an analyst said, but added that domestic price trend did not indicate it.

“The stock limit order and drop in imports could deplete inventories in the pipeline and in turn put pressure on the edible oil prices,” Mr Mehta said.

Already, various measures, including cut in Customs duty, initiated by the Centre to keep edible oil prices under leash have come unstuck as global vegetable oil prices have scaled to new heights.

This is because firm crude oil prices have led to demand for vegetable oils for producing bio-fuel.