MARKET DEVELOPMENT
21-08-2001
Surging soya oil imports may crush Indian growers
MUMBAI, Aug. 16. SOYABEAN oil has started to flood the country inunprecedented quantities even as the Government is apparently unable to doanything even to slow the flow.Opening of the floodgates is not only distorting the market, but alsoapprehensions that the sudden rush of imports at a time when the domesticcrop prospects are looking bright could hurt farmers' interests aregaining ground rapidly. Moreover, invoice manipulation in soyabean oilimports cannot be ruled out, say trade intermediaries.The import numbers, no doubt, bear out the fears. While soyabean oilarrivals during the whole of oil year 1999- 2000 (November-October) were5.61 lakh tonnes, arrivals in the first nine months of the current year -November 2000 to July 2001 - already totalled 8.38 lakh tonnes.Worse, out of this record quantity, 5.78 lakh tonnes arrived in the lastthree months. July alone saw a massive jump in soyaoil imports to anunprecedented 2.80 lakh tonnes as per latest estimate. In the currentmonth, several large vessels carrying soyabean oil are scheduled toarrive, while many are already in the process of discharging at variousports of the country.According to information reaching here, Kakinada port alone has in thefirst fortnight of this month discharged 34,000 tonnes of soyabean oil,the quantity equivalent to imports through the port in the previous fourmonths from April to July. The situation in other ports is no different.The rate of arrivals suggests that aggregate import of soyabean oil duringoil year 2000-01 may reach 13-14 lakh tonnes, about 25 per cent of thecountry's total edible oil imports during the year and nearly 150 per centmore than previous year's imports.The haste with which massive quantities of soyabean oil have beencontracted for import because of the advantage of lower duty (45 per centad valorem on crude soyabean oil) has led to serious implications forconsumer welfare.The massive surge in low-duty soyaoil over the last three months has ledto rampant adulteration of this oil with premium but scarce oils such assunflower oil. With the Government machinery inadequate and lax inmonitoring edible oil quality, adulterators are having a field day.Equally important, with the imported soyaoil glut, domestic processorswill find it uneconomic to crush indigenous soyabean in the ensuingseason. The harvest is just a few weeks away. On current reckoning,soyabean output is likely to rebound from last year's weather affected 48lakh tonnes to around 56-58 lakh tonnes this year. As processing marginessentially comes from sale of oil, processing activity may slowdown asmargin may not be attractive, it is feared. In case of soyabean, the oilcontent is 17 per cent only.The huge inflow of soyaoil is the result of a rather skewed customs dutystructure for edible oils announced in the Union Budget on February 28this year. While the basic customs duty on all edible oils was raisedsteeply to 75-85 per cent, soyabean oil attracted only 45 per cent becauseof WTO-binding. Apparently, soyabean oil enjoys the most-favoured-oilstatus with the Government.As a result, import of sunflower oil which was 5.74 lakh tonnes in1999-2000 is down this year by 50 per cent to 2.84 lakh tonnes as arrivalshave virtually dried up over the last two months. The acute scarcity ofsunflower oil, accentuated by sharp decline in indigenous output in thecurrent year because of drought conditions, has encouraged rampant mixingwith cheap oils such as soya.In addition, on August 3, the Government fixed tariff values for palm oils- crude palm oil, refined palm oil and refined palmolein; but soft oils(soyabean oil, sunflower oil etc) were left untouched.Trade intermediaries point out that the menace of invoice-manipulation maynot be confined to palm oils, but is equally likely in case of soyabeanoil also. Indeed, soyabean oil prices have been as volatile as palm oilprices. The price trends of both palm and soya oils over the last threemonths suggest they have moved in tandem.Interestingly, a wide variation is reported in the price of soyabean oilconsignments that have recently arrived and been cleared. A traderepresentative told Business Line on condition anonymity that invoiceprices varied from a low of $309 per tonne to a high of $400 a tonne costand freight, a variation which was rather unusual, to put it mildly. Largevolume consignments were priced lower, he pointed out.These developments have cast a shadow not only on trade
