MARKET DEVELOPMENT
20-09-2004
Indian Edible Oil Prices Fall As Government Cuts T
NEW DELHI (Dow Jones)--India's edible oil prices closed lower in theweek to Friday, following the government's cut in tariff values forimported edible oil.Tariff values are fixed prices which are used to calculate the importduty on edible oils. Tariff values are changed whenever internationalprices hover 10% above or below the tariff value.But while international palm oil and soyoil prices had fallen by morethan 10% in the past three to four months, the government continued to putoff cutting the tariff values.However, as the country's inflation started rising sharply over thepast several weeks, the federal Cabinet met Wednesday night, after whichFinance Minister P Chidambaram announced the cut in tariff values.The value for crude palm oil was cut to $454 a metric ton from$504/ton, RBD palm oil to $489/ton from $543/ton, palm oil to $471/tonfrom $523/ton, crude palm olein to $479/ton from $532/ton, RBD palm oleinto $497/ton from $552/ton, palm olein to $488/ton from $542/ton and crudesoyoil to $565/ton from $628/ton."The market expectedly reacted sharply to the cut in tariff values andfell sharply from Wednesday to Friday," said a trader in Delhi.The government also said Friday the tariff value cut has been able tocheck the rise in prices of edible oil.Traders said another impact of the cut in tariff values would beincreasing edible oil supplies in the country.Until Wednesday, a number of traders who imported edible oils had kepttheir stocks in the ports, anticipating a cut in tariff values, whichwould lower their import duty burden."Around 500,000 tons of edible oil stock will now pour in from marketsto the consuming centers," said a trader in Ahmedabad.Traders said while the increased supply and lower tariff values shouldlogically lead to a fall in prices for the next few weeks, increaseddemand for edible oils in the current festival season may cushion oilprices fromfalling too low.India's Hindu festival season began this month and will extend toNovember. Since all Hindu festivals are accompanied by community andfamily feasts, it increases the consumption of oils.Traders added that another area of concern for the market is the likelysize of the summer-sown oilseeds harvest.Scanty rains in July and low rains so far in September are thought tohave damaged the oilseeds crop, though the extent of damage is unknown sofar.Traders say if industry and government estimates predict a loweroilseeds harvest, it may lead to a rise in prices. India's AgricultureMinistry will present its initial estimates of the oilseeds harvestSaturday evening.India's oilseeds crop was sown from June to early September and will beharvested in October and November.Friday, refined palm oil was at 40,500 rupees ($1=INR45.90) comparedwith INR43,500/ton last week. Soyoil was at INR42,500/ton compared withINR44,200/ton.
