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India may cut edible oil imports duties to curb inflation

India may cut edible oil imports duties to curb inflation
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First Published: Thu, Feb 22 2007. 02 18 PM IST
Updated: Thu, Feb 22 2007. 02 18 PM IST
NEW DELHI: India, the world’s second-biggest buyer of vegetable oil after China, may cut import taxes on the commodity for a second time in five weeks to boost supplies and curb inflation that’s at a two-year high.
Finance Minister Palaniappan Chidambaram may announce in his 28 February budget speech a cut in import duties or remove the additional 4% levy, according to five out of six traders and importers surveyed by Bloomberg News yesterday. Taxes on palm and sunflower oils were reduced on 24 January.
Lower import taxes by India may bolster gains in palm oil prices in Malaysia and soybean oil in Chicago, analysts said. Palm and soybean oil futures have each risen almost 20% in the past six months on increased demand for oilseeds to make into alternative fuels.
“A duty cut will push up global rates,” said Govindlal G. Patel, director of Dipak Enterprises, a cooking oils trader at Rajkot in Gujarat, a western Indian state. “The cut may range between 5% to 10%.”
Palm oil on the Malaysia Derivatives Exchange advanced 0.2% to 1,929 ringgit (Rs24,425). The commodity averaged 1,559 ringgit a ton last year.
Prices of refined bleached and deodorized palm oil have gained 17% in the past year on the National Commodity & Derivatives Exchange to Rs440 per 10 kilograms. Refined sunflower and peanut oils have each gained 19% in the past six months on the Multi Commodity Exchange of India.
Prices Rise
The key inflation rate, which rose to a two-year high of 6.73% in the week ended 3 February, has become a liability for the Congress party-led coalition which faces elections in seven states this year. That’s prompted it to build stocks of wheat, sugar, pulses and other staples.
“If inflation stays at 6.5% to 7% and global prices continue to rise, the government will have little choice but to cut rates,” Amol Tilak, an analyst at Kotak Commodity Services Ltd. in Mumbai, said.
Crude palm oil imports are charged at 60%, while tax on refined bleached and deodorized palm oil is 67.5%. The country charges 45% duty on imports of soybean oil.
A smaller mustard crop, which accounts for 70% of India’s output of winter-sown oilseeds, has raised the pressure to cut levies, said Dipak Enterprises’ Patel. Mustard output may fall at least 14% this year to 6 million tons as farmers have planted more areas to wheat and cotton, he said.
Total oilseeds output may fall 16% to 23.62 million tons in the year ending June from a year earlier because of dry weather in the growing areas, the farm ministry said 6 February.
Imports Rise
A production shortfall and rising demand for fried foods may push up vegetable oil imports 15% to as much as 5.4 million tons in the year to October 2007 from a year ago, B.V. Mehta, executive director of Solvent Extractors’ Association of India said 29 January. The body represents 800 oilseed processors.
Imports surged 36% in January from a year ago.
India imports palm oil from Malaysia and Indonesia, the world’s biggest producers of the tropical oil, and soybean oil from Argentina and Brazil. Malaysia and Indonesia produce 85% of the world’s palm oil. The U.S., Brazil and Argentina grow 80% of the world’s soybeans.
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First Published: Thu, Feb 22 2007. 02 18 PM IST
More Topics: Money Matters | Commodities |