* India may shift orders to soyoil by 500,000 tonnes this yr
* India set to buy 1.2 mln tonnes palm oil in March, April
* Crude vegoil import tax not on the cards in 2010
* SE Asian palm oil narrowing their discount to soyoil

01/03/2010 (Reuters), Kuala Lumpur - India, the world's top vegetable oil buyer, may shift orders to soyoil from palm oil by 500,000 tonnes to meet higher middle-class demand if the price difference narrows further, the Sunvin group said on Monday.

India, which surpassed China in 2009 as the top buyer of vegetable oil, was expected to buy 9-9.5 million tonnes in 2009/10 on rapid economic growth and weak oilseed output. Palm oil was expected to account for 7.25 million tonnes and soyoil 1.2 million tonnes of imports.

The landed cost of palm oil from Indonesia and Malaysia now stands at $802.50 a tonne, 10.6 percent off $897.50 for South American soyoil that India's growing middle class tends to prefer, Sandeep Bajoria, chief executive of India-based Sunvin, told Reuters.

"So if the difference in the landed cost comes down to $50, then palm oil will lose half a million tonnes of market share," Bajoria said ahead of the Bursa Malaysia Palm Oil Conference next week.

India will start buying palm oil in a bigger way after a lull in February when port stocks were high, Bajoria said, estimating 1.2 million tonnes of cargoes to be shipped in for March and April.

"India had been buying quite a lot in November till January and stock levels have been high in February," Bajoria said, adding that imported vegetable oil stocks at ports stood at 0.9 million tonnes with palm oil accounting for most of it.

India's stockpiles have traditionally been very low and the South Asian country does not usually publish statistics on vegetable oil inventories.

Benchmark crude palm oil futures KPOc3 on the Bursa Malaysia Derivatives Exchange was off one-week highs hit earlier on Monday by 0756 GMT. U.S. soyoil for March delivery BOH0 slipped.

POOR DOMESTIC OUTPUT, TAXES

India, which unveiled its budget last month, did not announce any plans to raise import taxes for crude palm oil and Bajoria expects the government to keep taxes at zero for 2010 in a bid to battle soaring food inflation.

The government first dropped the crude vegetable oil import tax in 2008 and cut the duty on refined oils to 7.5 percent from 27.5 percent to shore up imports due to lower oilseed output. Critics say the the domestic oilseed sector has suffered further as the influx of cheap vegetable oil imports force farmers to switch to more lucrative wheat.

Industry officials want a 30 percent tax on crude edible oil imports and a 40 percent level on refined oils to raise prices of oilseeds in the country and encourage domestic production.

But Finance Minister Pranab Mukherjee tried to make concessions in this year's budget announcement, saying that the government planned to spend 3 billion rupees to set up 60,000 pulses and oilseed villages in 2010-11.

The government also planned an integrated intervention for water harvesting, watershed management and soil health to enhance productivity and prevent a repeat of the poor monsoons last year that saw oilseed yields plummet.

"It is a step in the right direction but more needs to be done to boost domestic oilseed production," Bajoria said.