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Palm oil imports may increase on duty cut

Palm oil imports may increase on duty cut
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First Published: Mon, Mar 24 2008. 11 30 PM IST
Updated: Mon, Mar 24 2008. 11 30 PM IST
India’s imports of palm oil are likely to increase at the expense of rival soyoil thisoil year that began in November 2007 following a cut in import duty, but a preferencefor soy among some firms will limit gains, traders said on Monday.
Last week, the government cut import duty on crude palm oil to 20% from 45%, while that on refined palm oil was trimmed to 27.5% from 52.5% to help fight inflation, which rose to a 10-month high in early March. The government, however, left the duty on soyoil unchanged.
Earlier estimates for imports of 4.3 million tonnes (mt) of palm oil and 900,000 tonnes of soyoil this oil year to 31 October were now likely to be off the mark, traders said.
“Now India will probably import about 4.6mt of palm oil and 600,000 tonnes of soyoil,” said Sandeep Bajoria, chief executive of Sunvin Group, a consultancy and trading edible oils firm.
He said that palm oil was about $200 (Rs8,060) per tonne more expensive than soyoil on international markets last week but this was likely to narrow to $100 in the next one or two months.
Malaysian crude palm oil futures rose 5.3% on Monday as funds piled back into commodity markets after a sell-off last week, dealers said.
Used in products ranging from cooking oil to biofuels, palm oil is about 22% below last month’s historic highs of $1,402 but has begun to turn up after India cut duties.
“Palm oil imports will rise on three counts—prices are low, duty is low and there is geographical proximity,” said Ashok Sethia, president of the Solvent Extractors’ Association of India.
“We think palm oil will now constitute more than 60% of total edible oil imports. It will also depend on prices, which are currently attractive,” he added.
Prices of crude palm oil in the Indian market have fallen by Rs2,000 to Rs2,500 per tonne after the duty cut to Rs52,500 per tonne, while soyoil has risen by Rs1,600 per tonne to Rs62,700 per tonne.
Rajni Panicker, the Mumbai-based head of commodity research firm MF Global, said the cut in palm duty should eventually lower palm oil prices by around Rs4,000 per tonne.
But he said consumers may not fully benefit as suppliers often increase prices after moves to cut duty.
The landed cost of palm oil in India had fallen by $400 per tonne in the last 20-25 days due to weak international markets.
India consumes around 11mt of edible oils a year, helped by imports of nearly 6mt.
It buys palm oil from Malaysia and Indonesia and soyoil from Brazil and Argentina.
“Soyoil imports may be 500,000 tonnes to 600,000 tonnes during the current oil year, against last year’s level of 1.2 million tonnes,” said B.V. Mehta, executive director of the Solvent Extractors’ Association of India.
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First Published: Mon, Mar 24 2008. 11 30 PM IST
More Topics: Palm Oil | Import | Duty | Money Matters | Commodities |