19/11/2008 (Reuters), Mumbai - Indian edible oil makers, reeling from a supply glut and low prices due to a surge in imports, are hoping to beat a likely imposition of import duty by the federal government and cash in on a possible price hike.

India bought 200,000-300,000 tonnes of surplus edible oil, mostly crude palm oil (CPO) in October to take advantage of low global prices at the time and on expectation imports may be taxed by the federal government after the festive season in late October.

The government, late on Tuesday, imposed a 20 percent duty only on imports of crude soybean oil, while leaving crude palm oil imports tax-free, dashing hopes that prices could recover in coming weeks.

"If government had to support prices they should have levied a duty on palm oil. Until that happens, prices will not be supported," Ramesh Garg, chairman of KS Oils (KSOI.BO: Quote, Profile, Research), which imports up to 12,000 tonnes of CPO monthly, told Reuters.

Edible oil firms, who had paid only an upfront margin for their imports, are now delaying picking up stock from the terminals, to avoid paying the balance money, Kanubhai Thakkar, managing director, Gokul Refoils & Solvent Ltd (GOKU.BO: Quote, Profile, Research), said.

With domestic edible oil prices dropping by a third in the last six weeks, the companies will face losses if they sell the imported stock locally now.

Purchases of edible oil from overseas markets rose to 787,000 tonnes in October, the most in 14 years, as palm oil futures in Malaysia, the world's leading producer, fell 29 percent since Oct. 1.

Several small and medium refineries had also deferred their July and September shipments to October as prices slid, officials said. India usually imports more in July-September as consumers use up local stocks.

The levy of duty on soyoil alone "is a half-hearted measure. I don't think it will support the falling edible oil prices for long," B.V.Mehta, executive director, Solvent Extractors' Association (SEA), a premier edible oil trade body, said.

Meanwhile, traders are holding their ground even as crude palm oil stocks continue to pile up at ports and await a notification on import duty on CPO, which could be just round the corner.

"Lifting of crude palm oil is not happening. Our terminal is nearly 80 percent full, which is very high," an official in Chemicals and Resins Terminal Pvt Ltd, which operates two terminals with over 300,000 tonnes capacity at Kandla Port, said.

"The stock will continue to lie at the ports for now. We will wait for a duty on CPO before we sell," KS Oils' Garg added.