15/10/2008 (The Hindu Business Line), Chennai - This Diwali, you may have to shell out a lower price for buying edible oil, thanks to the effect of the meltdown of global markets, including commodities.

The effect of the fall in global markets due to fears of recession has been such that prices of domestic oils have declined to a level that rates of RBD (refined, bleached and deodorised) palmolein, groundnut and rice bran oils are lower than last year. Prices of sunflower and soyabean oils are nearer to last year levels. (See Table)

“Palm oil prices are in fact lower than the rates that prevailed during 2006,” said Mr B.V. Mehta, Executive Director of the Solvent Extractors Association of India.

HIGHER IMPORTS

Besides the fall in global vegetable oil prices, rising imports too are seen keeping the market under leash. Between July 15, when prices of almost all commodities peaked, and October 14, the market has declined by $500-700 (See Table). The extractors body attributes the bearish trend to higher production and stocks of palm oil in Malaysia and Indonesia, roll-back of export duty on soyabean oil by Argentina and increased production of sunflower seed in the Northern Hemisphere.

“Overall production of oilseeds is estimated at 420 million tonnes during 2008-09 compared with 391 last year. Besides, prices of crude oil have declined to below $80 a barrel from $146 seen in July,” the association said in a press release. “The bearish trend is likely to continue for some more time,” it said.

During September, 6.23 lakh tonnes (lt) of vegetable oils were imported into the country against 5.70 lt during the same period a year ago. Palm group of oils made up 77 per cent of the imports during the month, down compared with the preceding months as 1.23 lt of soyabean oil also brought into the country.

In fact, vegetable oil imports during September were the highest for the current oil year that ends this month.

For the 11 months of the season, imports have been estimated at 48.22 lt against 42.13 lt during the same period a year ago. If one were to include imports for non-edible purposes, then shipments into the country have been estimated 54.29 lt against 48.02 lt.

The falling prices and September being a lean crushing period also aided more imports.

FALLING PRICES
With imports of edible oil turning cheaper, it is natural that prices in the domestic market are falling.

“Domestic edible oil prices will have to fall in sympathy with the landed prices of palm oil. With palm oil ruling at Rs 37 a kg, rates of other oils have no alternative to fall,” analysts say.

“Palm oil makes up 40 per cent of Indian edible consumption. On Tuesday, Malaysia increased the quota of crude palm oil exports to 3 million tonnes from 2 million tonnes. These could be bearish factors on Indian edible oil market,” Mr Mehta said.

‘IMPOSE CUSTOM DUTY’
But the fall in global edible oil prices has led to requests of imposing Customs duty vegetable oils that were scrapped earlier this year as the rates soared. “If the Centre does not impose import duty, then growers will be affected badly. It could lead to lower acreage in the rabi season and also next season. We have to ensure some increase in oilseeds production and it can be ensured only through good prices for the growers,” industry sources said.

“If the Centre does not impose import duty, then it will have to procure oilseeds to ensure farmers do not resort to distress sale. The industry favours remunerative prices for growers for its own good,” said Mr Mehta.