Friday March 4, 2:39 PM KUALA LUMPUR (Reuters) - Imports of edible oilsby India, the world's biggest importer, could stay flat at around 4.8million tonnes in 2004/05, but soy oil will gain market share at theexpense of palm oil, a respected industry analyst, Dorab Mistry, said onFriday.

Mistry, who is also a director of commodities house Godrej InternationalLtd, told a palm oil conference in Malaysia that India could allow theimport of oilseeds, although he declined to specify a timeframe.

"Soy will sharply gain market share this year," he said.

While palm oil imports in 2004/05 could fall to 3.3 million tonnes from3.6 million last year, soy oil imports were likely to rise to around 1.35million tonnes from 925,000 tonnes, Mistry added.

Leading analysts have said bumper soybean crops in Brazil and Argentinawould depress soy oil prices over the longer term, prompting somecustomers to shift to soft oils in place of palm.

In 2005/06, Mistry said India's total edible oil imports could rise to 5.3million tonnes from this year's 4.8 million.

He added that India's farm ministry is keen to encourage imports of rawmaterials instead of finished goods, which could lead to oilseed imports.Seed imports are currently not allowed.

"I would caution that there is now a distinct possibility that India willfacilitate the import of oilseeds, particularly rapeseeds and sunseeds,"he said.

"If that were to happen, I believe about half a million tonnes of oilseedscould be imported in the first year and that could replace about 200,000tonnes of vegetable oil imports, with both palm and soy losing about100,000 tonnes each," he added.

BASE PRICE DECISION A "MISTAKE"

Mistry said India's decision to cut the base import price of crude soyoilthis week was a mistake.

New Delhi made a cut of 14.2 percent on Tuesday in the base import price,used for calculating duties on soyoil shipped in from South America.Traders had said the generous cut would spur imports and could depress theprice of domestically-produced oil.

"It is such an erroneous decision that it has to be rectified within thenext week or 10 days," Mistry said.

A substantial portion of the industry wanted the government to reverse itsdecision, edible oils experts from India attending the conference had saidon Thursday.

India fixes base prices to prevent loss of revenue from under-invoicing bysome importers. Traders pay import duties on base values irrespective ofpre-landed prices of oil.

Mistry also said Malaysia's palm oil prices are expected to trade ataround 1,300 to 1,400 ringgit per tonne until May.

"There is a greater likelihood that prices will be at the upper end ofthat range as stocks decline," Mistry said, adding that he expected theprice of 1,300 ringgit a tonne to be a strong support level.

The benchmark third-month crude palm oil futures fell 0.7 percent onThursday to close at 1,394 ringgit ($366.84).

"Pressure from South America's bean oil from June onwards is likely topush CPO prices back towards the lower end of 1,300-1400 ringgit," Mistrysaid.

In the third quarter, weather will play a critical part as palm oilproduction could decline from present highs, he added.

"I remind you there is no safety margin (for stocks) in 2005/2006 exceptcarry forward (trends) from previous years. So any weather hiccup willlead to a flare-up in prices."

But prices could fall below 1,300 ringgit a tonne if the world economyslowed and mineral oil prices dropped below $35 a barrel or crop weatherproved to be as benign as in 2004.

Mistry said the highs in production in palm oil had already gone on foreight months and were likely to extend to 12 months.

"But the most likely scenario is a dramatically dull and boring tradingrange from 1,300 to 1,500 ringgit for the rest of the year with thepossibility that prices will tend to move higher at the end of the12-month period as we begin to draw down stocks," he said.