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Informist, Tuesday, Jun. 10, 2025

 

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--MEIR Sood: Crude edible oil import duty cut largely to help refiners
--CONTEXT: MEIR Commodities Chairman GK Sood in interview with Informist
--MEIR Sood: Edible oil import duty cut to curb Nepal arbitrage via SAFTA
--MEIR Sood: Cheaper edible oil imports hurting domestic industry
--MEIR Sood: Govt push for grain ethanol hurting soymeal industry
--MEIR Sood: Indian sugar overpriced in global markets, exports sluggish
--MEIR Sood: After Pahalgam attack, Indian sugar lost Afghan mkt via Pakistan
--MEIR Sood: India sugar exports may be 700,000 tn or less in year to Sept
--MEIR Sood:Smuggling, trade stocking inflated domestic sugar demand last yr
--MEIR Sood: Govt must start open mkt sales of wheat only from Sept
--MEIR Sood:FCI rice offtake for ethanol seen at 4.0-4.5 mln tn by Oct-end

 

NEW DELHI – The government's recent move to cut the import duty on crude edible oils may have stemmed from an attempt to support domestic refiners, but it may put further pressure on domestic oilseed prices, said G.K. Sood, chairman of MEIR Commodities India Ltd., a global agricultural trading house that specialises in sugar, molasses, and pulses.

 

"The government has not responded to inflation," Sood told Informist in an interview. "They must have responded to the long-standing demand of the Indian refining industry to increase the duty differential (between crude and refined edible oils)." The edible oil refining industry has massive capacities, he said, and when refined edible oil imports increase, these capacities lie underutilised. However, imports of cheap crude edible oil hurt the domestic industry, he added.

 

On May 30, the government reduced the basic customs duty on crude palm oil, crude soybean oil, and crude sunflower oil by 10% to 16.5%. Last year, India had raised the duty on both crude and refined cooking oil by 20%. India meets more than 70% of its vegetable oil demand through imports.

 

The Mumbai-based MEIR Commodities is a prominent player in the global agricultural commodities trade. It has also partnered London-based MAREX to provide research-driven forecasts and insights for various commodities. The company had decided in March to go for an initial public offering and filed a draft red herring prospectus with the Securities and Exchange Board of India, but it later dropped the plan and withdrew the application in May.

 

The recent duty cut is also aimed at curbing Nepal's arbitrage through duty-free imports under the South Asian Free Trade Agreement. "When India increased the import duty last year, the arbitrage of Nepal imports increased," Sood said. "Nepal imports soybean oil and refines it, and shows adequate value addition as required under the treaty." While only 300,000–400,000 tonnes of refined edible oil enter India through Nepal, it still exerts downward pressure on domestic edible oil prices, he said.

 

Sood pointed out that cheaper crude oil imports--including palm, soy, and sunflower--ultimately depress prices of domestic oilseeds such as mustard and soybean. Soybean processors, in particular, are facing a dual blow--first from cheaper imports, and second from the rising availability of distiller's dried grains with solubles.

 

"Soymeal protein is better quality, but DDGS (distiller's dried grains with solubles) is cheaper per unit of protein," Sood said. Still, the feed industry is replacing soybean meal with distiller's dried grains with solubles wherever it can--in cattlefeed, pigfeed, and fish feed--because it's cheaper. Additionally, the government incentives for ethanol production from grains increase the supply of distiller's dried grains with solubles.

 

The government has incentivised ethanol production from grains--maize, surplus rice from the Food Corp. of India, and damaged grains--by offering prices higher than for biofuel from sugarcane-based feedstock. "If the government keeps pushing grain-based ethanol, the soya sector will suffer," Sood said. "They will have to choose whether to support ethanol production from grain or save the soya industry. One way out is to increase ethanol from sugar, which doesn't generate DDGS."

 

STRUGGLING SUGAR EXPORTS

Though India entered the global sugar market after a gap of two years, exports have not picked up. Indian sugar is uncompetitive as world sugar prices are hovering at $460–$470 per tonne, while Indian free-on-board quotes are around $530 per tonne, Sood said.

 

When India reopened sugar exports in January, global sugar prices were at $460-$470 per tonne. Indian exporters assumed global sugar prices would improve and bought quotas from millers at a premium. Though white sugar futures rose to $560 in March, the global sugar price is back to about $465-$470 per tonne. "Indian sugar is already overpriced by $60–$70 per tonne," Sood said. "Exporters bought quotas assuming prices would rise. Now they are stuck with high prices. They are reluctant to take a loss."

 

Of the 1 million-tonne export quota set for the sugar year 2024-25 (Oct-Sept), Sood says India might end up shipping only 700,000 tonnes at best. The government and industry associations, however, expect exports to reach 800,000 tonnes. In addition, after the terrorist attack in Pahalgam, India lost its access through Pakistan to the market in Afghanistan. "The Afghanistan route for Indian goods has been stopped via Karachi," Sood said. "So we have to take a longer route and banks are not accepting that longer route via Iran because of sanctions." Therefore, India is left with only smaller markets such as Sri Lanka.

 

On domestic consumption, Sood dismissed speculation of a slowdown. "If at all people's food habits change, they will be gradual, they can't be sudden," he said. He attributed the apparent drop in demand to statistical miscalculations in the monthly sales quota. "Last year, sugar dispatches were 29.7 million tonnes, which people believe is demand," Sood said. But it included around 700,000 tonnes of sugar smuggled to Nepal and Bangladesh, some 500,000 tonnes held by traders on expectations of a hike in the minimum selling price of sugar, and another 500,000 tonnes exported through country-wise quotas but recorded as domestic sales, he said.

 

The quotas were given to the beneficiary countries to import from India, not to mills, he explained. "Those countries nominated some exporters from India to supply. So, where did they buy? They went to a mill! The mill reported those sales as domestic sales. So half-a-million tonnes of sugar reported as domestic consumption was actually exported." The actual domestic sugar consumption last year is thus estimated to be 28.0 million tonnes.

 

Sood also noted that media reports and rumours of a government proposal to increase the minimum selling price of sugar led to stocking of the commodity last year. "They (the trade) thought prices would go up. So they bought some extra in the pipeline. Nobody knows how much it is, let's say 500,000 tonnes."

 

Though there was a proposal to increase the minimum selling price of sugar from INR 31.0 per kg to INR 35.5, it was stalled at higher levels. "The bureaucracy thought it was due. Political level thought not due," he said. With the string of elections last year, the ministers did not want to fuel food inflation, he added. 

 

WHEAT PRICES

On wheat, Sood said prices remain firm despite the stock limits as the floating stock this year is broadly in line with last year. Though wheat production increased by 4-5 million tonnes this year, private trade and the government increased their purchases to replenish their pipelines.

 

According to the government's third advance estimates, India's wheat production for the crop year 2024-25 (Jul-Jun) is estimated at 117.5 million tonnes, up from 113.3 million tonnes last year. However, the market consensus is of a more conservative rise in output--to 110 million tonnes in 2024-25 from 105 million tonnes in 2023-24.

 

The government has procured 29.7 million tonnes of wheat in the rabi marketing season 2025-26 (Apr-Mar), up from 26.6 million tonnes last year. "The government has taken 3 million tonnes more, the private pipeline has taken 2 million tonnes more, and an extra 5 million tonnes are gone," Sood said. That 5 million-tonne draw has kept "floating stock in the market the same as last year, and that's why prices remain firm", Sood explained. He said the wheat stock limits have helped to stop a further rise in prices.

 

If the government tries to clear the trade pipeline by imposing stricter stock limits, it will invite more distortions, he said. "Pipeline is not anybody's enemy. Pipeline is needed," he added.

 

However, he noted that the current wheat price of around INR 2,750 per 100 kg should not raise concerns. "MSP (minimum support price for wheat) is INR 2,425 per 100 kg. Once you add incidentals, freight, and carrying costs, it crosses INR 2,700. The government didn't panic when prices were INR 3,250 in February. So why now?" Sood also stressed that when wheat market rates were at a record high in February, the government prioritised building its stocks rather than releasing the staple from its coffers through open market sales. 

 

On open market sales for wheat, Sood said, the government should not begin before September. "That's when demand rises, and pipelines start drying up ahead of festivals. Last year, they sold 3 million tonnes. This year they can offer 5 million tonnes." Informist had earlier reported that the government may start open market sales by June-end or early July and may offer at least 6 million tonnes of wheat. 

 

About growing rice stocks, Sood said it was bound to happen as the government incentivises paddy cultivation with high minimum support prices and state bonuses. On top of this, it has an open-ended procurement policy. Moreover, unlike wheat, the rice market lacks large industrial buyers. "Rice from OMSS (open market sales scheme) doesn't go to a miller. It goes to a trade channel of small redistributors. They buy in truckloads," Sood said. 

 

These distributors lack the infrastructure or incentive to go through time-consuming government procedures. "They have to bid, then make payment, then take a delivery order... and then he is not even sure what quality he will get," Sood said. He recommended auctioning unmilled paddy instead of rice to improve offtake. "Millers can handle bulk. Redistributors can't. FCI may have about 15-20 million tonnes of paddy in stock. They can just auction that."

 

Even for ethanol production, rice offtake by distillers has been sluggish due to operational issues. Of the 5.2 million tonnes of rice allocated for ethanol production in 2024-25 (Apr-Mar), only 1.3 million tonnes have been lifted so far, according to the government. The government has since given distillers time till the end of October to lift rice from the FCI. "Maybe 4.0–4.5 million tonnes will be lifted this year," Sood said. Delayed allocations and bottlenecks in logistics have slowed the lifting of rice stocks. With better planning and timely allocations next year, this can improve, he said.  End

 

US$1 = INR 85.60

 

Edited by Rajeev Pai

 

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