By Sandip Das, Nanda Kasabe & Nayan Dav
The surge in edible oils’ imports was threatening to widen India’s merchandise deficit even before the Russia-Ukraine crisis, but the eastern European conflict might worsen the situation. The government had tried to address the issue of a sudden rise in India’s reliance on imports for edible oils by reducing tariffs twice — in September and December — last year. However, the high prices of the commodity in the global markets had meant that these steps produced only a marginal impact. And now, disrupted supplies of sunflower oil from Ukraine, which in recent years accounted for 90% of India’s imports of the item, are likely to push domestic prices of this commodity up, besides causing a serious shortage.
India’s edible oil import volumes have remained largely at the same levels in recent years, but the import value has jumped due to skyrocketing global prices.
According to estimates made by the trade before the Russian invasion of Ukraine, edible oil imports were to jump 28% on year to Rs 1.5 lakh crore in 2021-22. In 2020-21, these imports had surged by 44% (see chart).
India imports about 55% of its total domestic requirement of edible oil. It depends on Ukraine for sunflower oil, which had 14% share in total edible oil import basket in 2020-21.
Crude palm and soybean oil are imported from mainly Malaysia, Indonesia, Argentina and Brazil; these items had shares of 62% and 21% in the total edible oil imports respectively.
Disruption in supplies of sunflower oil from Ukraine has forced importers to look for alternative sources such as Canola from Canada; also for rice bran, the importers are looking at Vietnam and Thailand for meeting any supply shortfall of the Russia-Ukraine conflicts lasts long.
According to BV Mehta, executive director, Solvent Extractors Association of India, India imports around 2.5 million tonne (mt) of sunflower oil annually which could now be disturbed. “We are exploring the possibility on how to maintain a smooth supply chain by sourcing other oils like Canola rice, bran oil and olive oil pomace, safflower oil to maintain the supply chain,” Mehta told FE.
Anshu Malik, CEO & MD of Adani Wilmar (AWL), the largest importer of edible oils, said. “There is adequate stock of sunflower oil in the pipeline till the second week of March. If the situation between Russia-Ukraine doesn’t improve, sunflower oil and even other edible oils will be impacted as far as prices are concerned.”
Since the invasion of Ukraine by Russia, global crude soybean and palm oil prices have increased by around $75 per tonne to $1,690 and $1,700 per tonne, respectively. Domestic edible oil processors are keeping a close watch on the evolving situation.
India’s significant import dependence for edible oils started in late 1990s when the imports were just 1.7 mt which rose to 5 mt in 2007-8. After that there has been a constant rise in imports, in sync with the rise in domestic demand from an emerging middle class. In 2020-21, India imported 13.41 mt of edible oil while the domestic production was only 11.16 mt. “Domestic production of edible oils is unable to meet domestic demand. The domestic consumption of edible oils is around 25 mt while the domestic production is only 11.6 mt,” an agriculture ministry official said.
Domestic production of oil seeds haven’t kept pace with the consumption demand; output fluctuated between 24 mt and 32 mt between 2005-06 and 2018-19. Production is estimated to be at an all-time high of 37.14 mt during 2021-22 crop year (July-June), according to the Union agriculture ministry.
Minimum support price (MSP) operations for oilseeds has been marginal over the years. Domestic mandi prices are now much above the MSP level. Mandi prices of soya bean oil is nearly double the MSP currently.
The government had in December 2021 reduced the basic customs duty on refined palm oil to 12.5% from 17.5% to bolster domestic supplies and curb price rise. These rates, which were to be effective until the end of March 2022, will now remain till the end of September, 2022. The zero customs duty regime for crude versions of palm oil, soyabean oil and sunflower oil will also be effective till September 30, 2022.
The government had trimmed duties on select edible oils in September 2021 as well.
from The Financial Express https://ift.tt/B26lmhL
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