25/09/2009 (Bloomberg) - India, the biggest buyer of edible oils after China, may restore duties by March to protect local oilseed farmers from cheaper overseas purchases of cooking fat, said Dorab Mistry, director of Godrej International Ltd.

Farmers sowed oilseeds to 16.74 million hectares, down from 17.98 million hectares a year ago, because of dry weather. That may keep imports of palm and other edible oils at a record for a second year, the Solvent Extractors’ Association said this week.

Cheaper imports may pressure domestic oilseed prices at a time when farmers harvest the monsoon-sown crops of soybeans, peanut and sesame, said Mistry. Soybean production in the U.S., the world’s largest grower and exporter, will climb to a record 3.245 billion bushels this year, the USDA said Sept. 11. Palm and soybean oils are direct substitutes.

“There will a humungous supply of soybeans from countries led by the U.S. and at the same time you will see an up tick in palm oil supplies,” said Mistry in an interview at an industry conference in Mumbai. “India will have to seriously consider taxes on imports after the winter harvest is concluded.”

India abolished import duty on crude palm oil in April last year, and in March lifted a 20 percent tax on crude soybean oil purchases. The two commodities are substitutes. Refined edible oils are taxed at 7.5 percent.

“The government has stated that the current duty structure will remain in place for a year,” Federal Food Secretary Alka Sirohi told the conference. “We will ensure that appropriate safeguards are put in place to protect farmers’ interest.”

Purchases in the 10 months ended Aug. 31 jumped 49 percent to 7.07 million tons, according to the association. Imports in the year starting Nov. 1 may be 8.5 million tons, Mistry said.

GM Seeds
The country relies on imports to meet half its cooking oil needs and buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil. The deficit can be eased if the use of gene-altered seeds is permitted, said Mistry, who has traded edible oils for more than three decades.

“Our consumption is rising and production is stagnant,” he said. “There’s no other way you can overcome the shortage besides introducing GM oilseeds, like in the case of cotton.”

Indian cotton farmers may plant modified crops in about 8.3 million hectares in the next two years, 90 percent of the normal area devoted to the crop annually, the International Service for the Acquisition of Agri-Biotech Applications said in February.

The South Asian nation may surpass the U.S. as the biggest exporter and challenge China’s dominance in textile and apparel production in the next few years, commodity broker FCStone Group Inc. said in October 2008.