28/12/2011 (Economic Times) - Agricultural processor Bunge Ltd is planning to set up an edible oil refinery on India's western coast as it aims to expand in the world's top importer after buying a local firm last week, the head of its Indian unit told Reuters.

Bunge, the world's largest oilseed processor and among the top sugar and ethanol producers, last week said it had agreed to buy the edible oil business of Amrit Banaspati Company for 2.21 billion rupees ($42 million).

"We are going with 1,200 tonnes per day plant at Kandla and that should be operational by early 2013," Adhiraj Sarin, managing director of Bunge India, told Reuters in an interview on Monday. He declined to give a cost estimate for the plant.

Kandla is a port in India's western state of Gujarat.

Bunge has large soybean crushing operations in the United States and South America, allowing it to import crude soyoil for the Indian market.

The acquisition gave Bunge key brands of Amrit Banaspati like Gagan and Ginni, which the Indian company had not expanded as far as it could in North India due to capacity constraints.

"Because of their capacity constraints they were unable to expand their volume into Uttar Pradesh and other markets. Once the capacity constraint is eased because of our own plant at Kandla, clearly we see an opportunity to expand these brands," Sarin said.

Bunge currently does most of its refining through third parties in India and it wants to trim dependency, he said.

"What we are putting up in Kandla is some of the capacity growth that we needed. Rather than going third-party we decided to invest in setting up a refinery."

Bunge has edible oil manufacturing and refining plants at Bundi in north-western Rajasthan state and Trichy in southern Tamil Nadu state.

Most Indian edible oil companies like Ruchi Soya prefer buying crude edible oils overseas and refining them in the country and selling it under their respective brands.

RISING DEMAND

Bunge, based in White Plains, New York, has been witnessing 8-10 percent annual growth for its branded edible oils in India. It is expecting its sales of edible oils, bakery fats and Vanspati, or hydrogenated vegetable cooking oils, in the country to double in 2012 from this year's estimated 180,000 tonnes.

Rapid economic growth in China and India has boosted edible oil demand, largely met from imports of palm oil, which is cheaper than other vegetable oils like soy and groundnut.

India could boost imports of edible oils 5.2 percent in 2011/12, reversing a fall this year, as domestic output struggles to keep pace with demand from a growing and increasingly wealthy middle class.

Consumption of vegetable oils -- around 95 percent of which are edible oils -- in 2011/12 could rise to 18.5 million tonnes from 18.06 million tonnes in 2010/11, Hamburg-based oilseeds analysts Oil World has forecast.

Rapeseed is the main winter-sown oilseed in India and current weather conditions are not favourable for its growth. Bad weather can trim rapeseed production and squeeze local edible oil supplies, leading to higher dependency on costlier imported oil.

The January benchmark soyoil contract on India's National Commodity and Derivatives Exchange hit a high of 708.3 rupees per 10 kg on Monday -- the highest level for the first month contract since March 2008.

Indian farmers have sown rapeseed on 6.383 million hectares as on Dec. 23, down from 6.775 million hectares a year ago, data from the farm ministry showed.

India buys mainly palm oil from Indonesia and Malaysia and a small quantity of soyoil from Argentina and Brazil.

The south Asian country's growing hunger for commodities has lured trading firms such as Noble, Louis Dreyfus, Cargill and Czarnikow to India, while NYSE Euronext, Goldman Sachs, and Fidelity International have bought stakes in Indian commodities exchanges.

Bunge, the world's largest oilseed processor and among the top sugar and ethanol producers, last week said it had agreed to buy the edible oil business of Amrit Banaspati Company for 2.21 billion rupees ($42 million).

"We are going with 1,200 tonnes per day plant at Kandla and that should be operational by early 2013," Adhiraj Sarin, managing director of Bunge India, told Reuters in an interview on Monday. He declined to give a cost estimate for the plant.

Kandla is a port in India's western state of Gujarat.

Bunge has large soybean crushing operations in the United States and South America, allowing it to import crude soyoil for the Indian market.

The acquisition gave Bunge key brands of Amrit Banaspati like Gagan and Ginni, which the Indian company had not expanded as far as it could in North India due to capacity constraints.

"Because of their capacity constraints they were unable to expand their volume into Uttar Pradesh and other markets. Once the capacity constraint is eased because of our own plant at Kandla, clearly we see an opportunity to expand these brands," Sarin said.

Bunge currently does most of its refining through third parties in India and it wants to trim dependency, he said.

"What we are putting up in Kandla is some of the capacity growth that we needed. Rather than going third-party we decided to invest in setting up a refinery."