12/09/2012 (Reuters) - India's edible oil imports are likely to rise more than 4 percent to 10 million tonnes in the 2012/13 marketing year as domestic output in the world's top buyer lags rising demand, an industry official said.

The estimate by Solvent Extractors Association of India Executive Director B.V. Mehta is higher than the 9.6 million tonnes that India is expected to import in the current 2011/12 marketing year that ends on October 31.

Edible oils are the third biggest import by India after crude oil and gold and its increased demand is likely to support the prices of palm oil futures. The oil is a key component of the India's vegetable oil mix.

Mehta said India's palm oil imports in 2012/13 will rise 7.9 percent to 7.5 million tonnes from a projected 6.95 million tonnes in the current year. Most purchases will be crude grades.

"Strong GDP growth, contributed to mainly by the manufacturing and service sector, and also a rising population automatically translates to higher demand," Mehta told Reuters at an industry conference in the Malaysian capital.

"So it will be in the palm oil producer's interest to look as India as a large market that is going to be available long term and do all that is required to sustain and service it."

India used to import crude palm oil from top producer Indonesia to keep its domestic refineries in business, but it has since turned to Malaysia after Indonesia cut export taxes for refined palm oil to boost its own processing industry, limiting sales of crude palm oil.

India has also made Indonesian refined palm oil imports costlier by raising taxable price value on these cargoes from August.

As a result, India's refined palm olein purchases will fall 25 percent to 1.2 million tonnes in the new marketing year from 1.6 million tonnes, Mehta said. Crude palm oil imports are set to rise nearly 18 percent to 6.3 million tonnes.

WEAK DOMESTIC OUTPUT?
India has struggled with a patchy monsoon this year, which have spurred more imports. However, a late monsoon revival last week has changed the scenario for winter sowing of the rapeseed crop that is due to start next month, Mehta said.

"It is too early to say but I am confident the rapeseed crop could hit 6 million tonnes in the new marketing year since the monsoon came back to life," he said.

That represents a 9 percent rise from the current year to October when rapeseed production stands at about 5.5 million tonnes.

"It is an improvement but its not enough at all. We will have to depend on imported oils, especially palm oil to feed India and keep our refiners in business as well," Mehta said.