The
oily course
S
Venkatraman from Rabo India finance examines the trends in the edible
oil sector and the expected implications of the changing market
India
is the largest importer (ahead of EU and China) and the third largest
consumer (after China and EU) of edible oil in the world. It buys almost
15 per cent of the total oils traded worldwide.
Each year, the country consumes over 10 million tonnes of edible oil
(see figure 1). The per capita consumption is around 10 kg per year,
considerably lower than most developed countries. Palm oil (mainly imported)
and soyabean oil account for almost half of the total edible oil consumption
followed by mustard and groundnut oil.
Until the early 1990s, India was selfsufficient in the production of
edible oil. Trade policy reforms in the mid-1990s, followed by declining
domestic oilseed production, fuelled an increase in oil imports. Depending
on the domestic demand and supply situation, changes were made to the
tariff rate on certain oils and also to the differentials between the
tariffs of refined and crude oil. Duties were based on the Tariff Rate
Value (TRV), which is aimed at preventing the reporting of low import
prices to evade tariffs.
The recent changes in policy are:
Year 2000: Higher tariffs were introduced for refined oils, as
opposed to crude oils, to shift imports from refined, bleached and deodorised
(RBD) palmolein and refined soft oils to crude oils.
Year 2001: The import duty on sunflower oil and safflower oil
was increased from 35 per cent to 75 per cent, while on soyabean oil
from 35 per cent to 45 per cent. This led to an increase in the consumer
prices of sunflower and safflower oils and therefore consumers shifted
to cheaper options.
In October 2001, the duty differential between crude palm oil and RBD
palmolein went up from 17.4 per cent to 27.4 per cent.
This led to a further increase in the import of crude oil.
Year 2003: Excise duty for branded and unbranded products was
announced as Re 1 per kg for all refined oils and Rs 1.25 per kg on
vanaspati.
Owing to the reduced rainfall and drought in many parts of the country
in 2002-03, oilseed output was projected to drop from 20.5 million tonnes
in 2001-02 to 15.6 million tonnes in the subsequent year. This led to
a sharp increase in edible oil prices. In 2003, the import duty on RBD
palmolein was reduced from 92.4 per cent to 70 per cent. Only 6,400
tonnes of RBD palmolein was imported between November 2002 and April
2003.
Following the reduction in duty, 319,379 tonnes were imported in the
period May 2003 to October 2003.
The share of refined oils (led by RBD palmolein) also went up by over
10 per cent. The industries are urging the Indian
Figure
1
Edible oils in
India – key statistics
| OPENING
STOCK |
0.90
|
0.84
|
| DOMESTIC
PRODUCTION |
5.64
|
4.33
|
| TOTAL |
6.54
|
5.17
|
| CONSUMPTION |
10.13
|
9.85
|
| DIFFERENCE |
3.59
|
4.69
|
| CLOSING
STOCK |
0.84
|
0.38
|
| IMPORTS |
4.43
|
5.07
|
| POPULATION
IN MILLION |
1014
|
1057
|
PER
CAPITA
CONSUMPTION ( KG) |
9.73
|
9.32
|
ALL
FIGURES ARE IN MILLION TONNES SOURCE: SOLVENT EXTRACTORS' ASSOCIATION
OF INDIA
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