MARKET DEVELOPMENT
17-05-2004
REVISION OF EDIBLE OILS BENCHMARK PRICE OVERDUE
New Delhi, May 13 (Dow Jones)India's benchmark import price of palm oil was last revised Nov. 17,2003, while the price of crude soyoil was last revised March 3.India calculates import taxes on edible oils based on thesegovernment-set prices, called "tariff values," regardless of the actualimport price reported by importers. As a result, these tariff values havea big impact on edible oil prices in the local and overseas markets as achange in the tariff value effectively means a change in India's importtax.With palm oil prices steadily rising in the international market sinceNov. 17, 2003, any revision of the tariff value to reflect current marketprices would in effect lead to a higher tax on imported palm oil and couldtherefore be considered bearish for prices.India imports around 5 million tons of edible oils annually, and palmoil constitutes 74% of the total imports. "The government didn't want torisk (higher edible oil prices by a) revision of edible oil tariff valueswhen elections were round the corner. I think once a new government isformed, there will be a revision of these prices," said D.P. Khandelia,chairman of the Central Organization of Oil Industry and Trade, or COOIT.Similarly, grains exporters are awaiting a decision on exportsubsidies on rice and wheat once a new government is in office.India's wheat and rice exporters were, until August 2003, only allowedto source subsidized grains from the state-owned Food Corporation ofIndia. Starting Aug. 1, however, FCI abruptly stopped supplying grain toexporters amid concerns of falling national stocks.The federal government has since allowed exporters to buy grainsdirectly from farmers and had at that time promised a subsidy package tomake Indian rice and wheat competitive in the international market. Thatpackage is yet to be announced."Grain exports will pick up as soon as the government announces itssubsidy. However, in the current political scenario, no one expects asubsidy announcement before June," said Suresh Pandya, vice-president(exports) at Vishal Overseas, a major Indian exporter of grains.The lack of export subsidies has brought Indian grains exports to anear `halt, with only very small quantities exported over the past sixmonths.
