6/4/07 (The Economic Times)  - MUMBAI: India may consider cutting down its crude palm oil imports from Malaysia marginally and substituting it with soyabean oil if prevailing high prices continue. Palm oil futures in Malaysia moved up on Wednesday to $612 per tonne (2,115 ringgit) in the June contract, highest since January 1999.

Market watchers feel that despite the high price, crude palm oil would still account for a major chunk of vegetable oil imports but could lose some market share to soya oil, which is fast gaining popularity.

According to BV Mehta, executive director, Solvent Extractors’ Association of India, if the high prices continue then importers could shift their focus to soyabean oil.

“While degummed soyabean oil has risen by about $30 from the March average of $680 per tonne, crude palm oil (CPO) has increased by $60 from March average of $580,” he said adding that if there is a price differential of about a $50 between CPO and degummed soyabean oil, then importers would prefer to buy soyabean.

The duty structure makes degummed soyabean oil cheaper than CPO. While CPO attracts a duty of 60%, duties on degummed soyabean oil are only 45%.

The import cost of CPO is currently $655 per tonne (CIF), and along with a duty of about 60% on tariff value ($447) the cost comes up to approximately $923 per tonne. Degummed soyabean oil import costs are $710 tonne, and duty of 45% on tariff ($580) comes up to $971.

“However, soyabean oil sells at a premium, and is cheaper to refine compared to crude palm oil, so a minor price difference boosts the imports of degummed soyabean oil,” said an oil trader.

According to Pradip Desai, MD, Palmtrade Services, a market intermediary, “There could be a rationing of demand from CPO to soyabean oil, however, palm oil will still remain the largest component of vegetable oil imports.”

He further pointed out that if the prices continue to rise, unless there is a further duty revision, there could be a preference for soyabean oil.

India’s demand for edible oils stands at about 120 lakh tonne per annum. Of this, about 50 lakh tonne is met through imports with palm oil accounting for about 70% of imports and soyabean oil accounting for about 25%. However, the import of degummed soyabean oil has been steadily increasing in the last year. (RM1 = Rs12.38)