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Informist, Monday, May 11, 20

 

NEW DELHI – The Solvent Extractors' Association has sought policy support from the government to navigate the ongoing supply disruption and rising import costs amid the war in West Asia. The edible oil industry body has requested for subsidised freight costs, priority berthing status for edible oil carrying vessels, and duty-free imports for oleochemical manufacturers to contain cost pressures amid high crude oil rates and a weak rupee. 

 

SEA said that freight rates have nearly doubled in some corridors, with shipments from Argentina to Kandla or Mundra ports rising to $140–$145 per tonne from pre-war levels of $70–$75. Freight for Russia-origin cargoes has increased to $90–$95 per tonne from $55, and Malaysia and Indonesia freight costs rose to $55 per tonne from $40 per tonne. 

 

On the insurance front, war-risk and marine premiums have also firmed up to $20–$25 per tonne from $15 for certain origins. "This, combined rise in freight and insurance, is adding a substantial cost burden on importers, compressing margins and contributing to higher domestic prices," SEA said, urging the government to subsidise the freight costs. 

 

Citing the non-availability of small-sized vessels, SEA requested a "priority berthing status" for vessels carrying crude edible oils to maintain a smooth supply chain, which would control inflation. The association has also asked for adequate and affordable working capital support to manage increased cost burdens. 

 

"While the ceasefire has brought some stability in trade flows, prices across most oils continue to remain elevated compared to pre-war levels," SEA said. Prices of edible oils, including the cost and freight in Mumbai after the ceasefire on May 7, were up $80-$120 per tonne from pre-war levels. 

 

This trend suggests that "the ceasefire has had a limited impact" on easing edible oil prices amid high freight costs, insurance premiums, and tight global supplies, SEA said, adding that the import basket is becoming increasingly price-sensitive under "dual pressure of currency depreciation and global price inflation." The rupee has depreciated over 4% from pre-war levels to 95.3 against the dollar, after hitting a record low of 95.43 against the dollar last week. 

 

However, the domestic oilseed crushing industry has benefited from high global prices of cooking oil. Mustard prices are currently quoted around INR 7,000 per 100 kilograms, above the minimum support price of INR 6,200, SEA said. In addition, a record 1.6 million tonnes of rapeseed mustard were crushed in April due to higher demand for domestic cooking oil. 

 

SEA has asked the government to allow duty-free imports under the "actual user condition" for oleochemical manufacturers, as finished products from Malaysia and Indonesia are being dumped in India at nil duty. 

 

On exports, SEA has urged the government to provide higher incentives for oilmeal exports, including an interest subvention of 5%. It also asked for support to diversify exports through trade facilitation and market access initiatives.  End

 

US$1 = INR 95.31

 

Reported by Afra Abubacker

Edited by Avishek Dutta

 

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