08/12/2009 (Bloomberg) - Vegetable oil purchases by India, the world’s biggest consumer after China, will reach a record this year as an import tax waiver pares costs and stokes demand in Asia’s third-largest economy.

Imports may rise 4.6 percent to 9 million metric tons in the year started Nov. 1, compared with 8.6 million tons last year, Govindlal G. Patel, director of Dipak Enterprise, said in a phone interview yesterday. That’s more than the 8.4 million tons he forecast in September.

Rising Indian demand may bolster a 50 percent gain in palm oil prices in Malaysia this year as the South Asian nation buys half its cooking oil from abroad. India ended the tax on imports of the commodity in April last year, and in March lifted a 20 percent duty on shipments of crude soybean oil.

Higher cooking oil prices “may start to pinch consumers in a while, but imports will still be higher because of a smaller local crop,” said Patel, who has been trading vegetable oils for more than four decades.

February-delivery palm oil fell as much as 0.9 percent to 2,535 ringgit ($748) a ton on the Malaysia Derivatives Exchange in Kuala Lumpur. The most-active contract was at 2,548 ringgit at 10:51 a.m. in Kuala Lumpur. The commodity accounts for almost 80 percent of India’s total vegetable oil purchases.

India’s oilseeds production in the 2009-10 season may drop 9 percent to 13.7 million tons after a drought in almost half the country curbed planting, the Central Organization for Oil Industry and Trade, the country’s biggest group of processors, said last month.

Demand Spurt
Cooking oils consumption this year may grow by as much as 6 percent, faster than the historical average of 4 percent, Patel said. Demand spurted 11.5 percent last year after the import tax was revoked.

Imports in November and December may be 700,000 tons each on average, he said. India imported 519,032 tons in November and 719,125 tons in December last year. Purchases in January may be 750,000 tons, including 200,000 tons of soybean oils.

“With inflation looking up and palm oil prices moving up, the government will not bring back duties,” Patel said. “That will encourage imports.”

India’s primary articles index, with 22.02 percent weight in the wholesale-price inflation basket and comprising mainly of food items, rose 12.53 percent in the week to Nov. 21 from a year earlier, the government said Dec. 3.

The South Asian nation buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil.