2/2/06 Mumbai (Business Line)  -  JANUARY saw a further decline in vegetable oil imports. According to preliminary data made available to Business Line by the industry portal Oilmandi.com, arrivals last month totalled 1.88 lakh tonnes comprising approximately 70,000 tonnes of crude degummed soyabean oil, 98,000 tonnes of crude palm oil and about 10,000 tonnes each of refined palmolein and crude sunflower oil.

With this, imports during the first three months of oil year beginning November 2005 totalled 4.94 lakh tonnes, considerably lower than 8.62 lt recorded during the corresponding period in 2004-05.

Interestingly, at 2.26 lt out of the total imports, the share of soyabean oil during the period is close to 50 per cent. This is causing consternation not only among palm oil producers and suppliers, but also among Indian refiners dependent on palm oil.

For the whole of oil year 2004-05, the share of soyabean oil was 40 per cent, that is 20 lt out of the total import of 50 lt.

With world soyabean oil prices falling, the price differential between crude palm oil and soyaoil has now narrowed by half to about $50 a tonne. Palm oil has remained firm at about Malaysia ringgit 1,450 a tonne.

No wonder, soyabean oil import is becoming increasingly more attractive, especially with the rate of customs duty at 45 per cent (WTO-bound). On crude palm oil, the rate of duty is 80 per cent.

Prospects for palm oil are further marred by import of vanaspati (largely believed to be palm oil-based) at zero-duty from Sri Lanka and at 30 per cent from Malaysia.

Factors that have contributed to decline in import volumes include satisfactory prospects for the ensuing rabi oilseeds crop (rapeseed/mustard is estimated at about 65-67 lt) and huge stock of 15 lt procured last season with the cooperative agency National Agricultural Cooperative Marketing Federation of India.

Weak overseas prices, import of vanaspati, uncertainties in disposal of existing stock, sluggish domestic offtake and disparity between internal and import prices have all combined to impact the market.

Representations from industry and trade associations to address the issues confronting the market have flooded the Government. Except tinkering with tariff values once a fortnight, nothing much seems to be happening.

On Thursday, soya oil futures at Indore showed unusual price spike and high volatility, based apparently on reports of possible restrictions clamped on imports. Belief is emerging that someone is playing the market.

Market fundamentals — both domestic and global — do not justify any large price increase at least over the next several weeks. Indeed, rapeseed harvest has commenced in a few pockets and arrivals would slowly gather momentum in the coming weeks.

South American soyabean crop is shaping well, so also sunflower seed. In Malaysia, palm oil stocks are well in excess of one million tonnes. With the rupee strengthening, imports are so much cheaper.