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Informist, Friday, Dec. 20, 2024

By Sandeep Sinha

MUMBAI – India's vegetable oil imports bill fell by $2.02 billion, or 11.4%, to $15.7 billion in 2023-24 (Nov-Oct), the second successive year of decline, due to lower imports and sharp fall in palm oil, soyoil and sunflower oil prices globally. The country imported vegetable oil worth $17.72 billion in 2022-23 and $21.12 billion in 2021-22, the data from the commerce ministry showed.

In volume terms, India's vegetable oil imports fell 3.1% on year to 15.85 million tonnes in 2023-24, after rising in the previous two years. Higher domestic edible oil prices crushed demand in the lower segment of society, the Solvent Extractors' Association of India said. The country imported a record 16.47 million tonnes in 2022-23, aided by the government lowering import duties to bring inflation under control.

"The overall supply and consumption of edible oil has increased in the last two-three years, and now we are seeing stagnation. The consumption increased in the country due to pent-up demand post COVID-19, a fall in edible oil prices globally and increase in domestic output that led to this difference of $2 billion," said Ajay Jhunjhunwala, former president, Solvent Extractors' Association of India.

The import of vegetable oil in the first month--November--of 2024-25 surged 40% on year to 1.63 million tonnes, the Solvent Extractors' Association of India data showed, indicating the reversal of trend.

The edible oil imports bill trend is likely to reverse in 2024-25 with prices in the global market likely to stay higher as there is a concern about lower output in countries like Malaysia and Indonesia due to climate change. Increase in domestic consumption, diversion toward biofuel in producing countries Indonesia and Brazil, higher customs duty in India, increase in export tax on palm oil in Malaysia, and depreciation of the rupee against the dollar will also contribute to the reversal in trend.

"India's vegetable oil import bill will definitely increase because the international prices have increased by 25% to $1,150 per tonne from $800-$900 per tonne and imports will be around 17 million tonnes from 15.7 million tonnes due to higher consumption," said Ajay Jhunjhunwala, former president, Solvent Extractors' Association of India.

"The edible oil import bill will be around $15 billion-$17 billion in the ongoing edible year due to stable imports but slightly higher prices than last year," said Nirav Desai, managing partner of GGN Research.

Jhunjhunwala said the international edible oil prices climbed after the Ukraine war hit supply chain and pushed other edible oils higher. After the initial surge, the prices corrected sharply and India imported a lot of edible oil in the last few years to deal with supply-chain disruption, which led to an increase in carry forward stock. The global price of palm oil tumbled to $800 per tonne in October 2023 from the high of $1,783 per tonne in March 2022. It was at $900-$800 per tonne in September 2022 to June 2024, after which, prices started to trend higher and rose above $1,150 per tonne leading lower imports of palm oil.

The Malaysian government in its Budget on Oct. 18 revised the export duty on crude palm oil effective Nov. 1, Malaysian Ministry of Finance said. The government notice said crude palm oil ranging from 3,601–3,750 ringgits per tonne (INR 67,857.78-INR 70,665.56 per tonne) will attract an export duty of 8.5%, while that ranging from 3,751–3,900 ringgits per tonne will have an export duty of 9.0%.

An export tax of 9.5% will be levied on crude palm oil priced from 3,901–4,050 ringgits per tonne, and for those priced above 4,050 ringgits per tonne, a 10% export duty was imposed. Earlier, export duty ceiling of 8% was applied for crude palm oil priced at 3,450 ringgits per tonne and above. Malaysia also raised the threshold for the windfall profit levy to 3,150 ringgits per tonne from 3,000 ringgits for Peninsular Malaysia, and 3,650 ringgits per tonne from 3,500 ringgits for Sabah and Sarawak from Jan. 1. These changes will increase the cost of oil imported from Malaysia which is the major source of imports for India.

The palm oil and soft oil share in India edible oil accounted for 56% and 44%, respectively, in 2023-24. The Palm oil to soft oil ratio in imports will decrease as palm oil becomes expensive against rival edible oils, Jhunjhunwala said. Palm oil, which used to trade at a discount to other edible oils has turned premium because of demand shift towards biodiesel in producing countries and stagnating production in Malaysia and Indonesia. Indonesia will implement B40 from Jan. 1.

Desai said that edible oil prices will remain high in retail market because of an increase in import duty and rise in global prices. The government on Sept. 14 raised import duty on edible oils by 22% to support domestic farmers get better prices for Kharif oilseeds, after rates fell below their minimum support prices.

Concurring with Desai, Jhunjhunwala said that current retail prices of INR 150-160 per litre was a new normal price for sunflower oil and soyoil. We are 60-70% dependent on imports and any fluctuation in international prices will be reflected in domestic prices. The effect of any increase or decrease in global prices will be seen in domestic prices.

The average monthly price of refined, bleached, and deodorised palm oil rose by $8, or 0.8%, to $952 per tonne in 2023-24 from $944 per tonne in 2022-23 for Indonesia and Malaysia. That of crude palm oil gained $20, or 2.1%, to $981 per tonne, according to data provided by The Solvent Extractors' Association of India to Informist.

In 2023-24, palm oil imports fell 8.2% on year to 8.90 million tonnes from 9.58 million tonnes due to lower imports from Indonesia and Thailand, as other edible oils became attractive against palm oil.

The sunflower oil imports overtook soybean to become the second-largest edible oil import with an increase of 16.8% on year to 3.5 million tonnes because Russian exports nearly doubled to 1.8 million tonnes from 979,753 tonnes. End

Edited by Akul Nishant Akhoury

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