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Informist, Saturday, Jul. 26, 2025

 

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--SEA Mehta: Palm oil imports to exceed soyoil in second half of year to Oct
--SEA Mehta: Palm oil imports preferred due to logistical advantage
--CONTEXT: Solvent Extractors' Association BV Mehta's comments in interview
--SEA Mehta: Palm oil share in edible oil import composition now 50% vs 60%
--SEA Mehta: Soft oils share in edible oil import composition now 50% vs 40%
--SEA Mehta: India needs about 8 million tonnes of palm oil every year
--SEA Mehta: Palm oil imports only way to get large quantity of edible oils
--SEA Mehta: Palm oil was costlier than soyoil, sunflower oil in Nov-Mar
--SEA Mehta: Palm oil cheaper than soyoil at the moment
--SEA Mehta: Experts see 2024-25 mustard crop lower than govt's estimate
--SEA Mehta: NAFED, HAFED, other agencies holding about 1.4 mln tn soybean
--SEA Mehta: Low productivity of oilseeds an area of concern
 

 

By Taniva Singha Roy and Abhijit Doshi

 

MUMBAI – Although India's soyoil imports have risen faster than those of palm oil in recent months, the situation will change soon, and imports of palm oil will exceed those of soyoil in the second half of the edible oil year 2024-25 (Nov-Oct) as the former has become cheaper again. "India has started buying large quantities of palm oil given its higher availability and logistical advantage," said Dr. B.V. Mehta, executive director of the Solvent Extractors' Association of India.

 

"In the past few months, India's edible oil import composition has shifted from 60% palm oil and 40% soft oils to an even split of 50?ch, due to higher palm oil prices during the first half of the season," Mehta told Informist in an online interview.

 

However, palm oil remains important. "We just cannot do without palm oil. India needs about 8 million tonnes of palm oil every year. Palm oil is the only way we can get such a large quantity of edible oil. It cannot be replaced totally by soyoil or sunflower oil," he said.

 

Imports of crude edible oil are likely to rise in the coming months, as there is a lineup of festivals in the next few months. Moreover, in the second half of the edible oil year, there will be less domestic availability. Hence, imports around that time will be higher than in the first half.

 

"Overall, imports this year are expected to be slightly lower than last year, as a good groundnut and soybean crop in the previous season has resulted in healthy carryover stocks," Mehta said.

 

The association had earlier flagged the issue of cheap imports of edible oil from Nepal, which enjoyed zero duty on exports to India under SAFTA (South Asian Free Trade Area) agreement. In May, the government changed the duty structure on edible oil imports, cutting the basic customs duty on crude edible oils while keeping that on refined oils unchanged. The duty difference has thus widened from 8.25% to 19.25%, thereby encouraging imports of crude oils instead of refined oils. "This has helped to check excessive imports from Nepal, as was expected," Mehta said.

 

Mehta feels the trend in many countries of blending edible oils like palm oil and soyoil with petrol and diesel could lead to higher prices of edible oils in India. He is also concerned with the current low productivity of oilseeds in India, and says that the association is actively involved in promoting better farm practices among farmers.

 

The following are edited excerpts from the interview:

 

Q: India has traditionally been a large importer of palm oil. But for the last few months, we have seen that import of soybean oil has been rising more than that of palm oil. Why is this happening?

A: Right from November to March, palm oil was costlier than soy and sunflower oil. This was the reason that India bought a large quantity of soyoil during that period compared to palm oil.

 

But now, palm oil prices are lower than soy and sunflower oil, and so India has started buying large quantities of palm oil. Another reason is that the availability of palm oil is much better, and it has a logistical advantage. And third, we are approaching the festival season, when demand for edible oil rises.

 

Going ahead, demand from the HORECA (hotels, restaurants and catering) segment will multiply. So, that is the reason why India has bought a larger quantity of palm oil in recent period. Also, its price is lower than that of soy oil now.

 

Q: Does this dynamic keep changing from month to month or even over a period of time?

A: Let us put it this way. Normally, India annually imports about 15 million tonnes to 16 million tonnes of edible oil. Earlier, it was 60% of palm oil and 40% of soft oil. Now, the ratio has changed to 50-50 or 55-45, soft oil has increased, palm oil has dropped. Because for palm oil, sometimes, price and availability is also an issue, but it has a strong logistical advantage. We just cannot do without palm oil. India needs about 8 million tonnes of palm oil every year. And palm oil is the only way we can get such a large quantity of edible oil. It cannot be totally replaced by soyoil or sunflower oil.

 

Once you place an order for palm oil, you get a shipment within 7 or 10 days. If you buy soybean from Argentina or Brazil, it may take 45 days to 60 days. Or if you buy sunflower from Russia or Ukraine, it will take 25 or 30 days. The high prices are also a matter of concern.

 

Q: Many countries are going for biofuel. This includes Indonesia from where we import sizeable quantity of palm oil. How will that affect prices of edible oil in Indian market?

A: That is a million-dollar question. Before 2025, the world used to produce about 263 million tonnes of vegetable oil, of which 53 million tonnes was used for biodiesel. So, roughly 80% was going for food and 20% for biodiesel. Now, with the Trump policy about converting soybean oil into biofuel, that may absorb about 5 million tonnes to 6 million tonnes. That is the fear. And also, if Indonesia decides to move from 40% to 50% of vegetable oil for biodiesel blending, then it will absorb another 3 million tonnes. So this adds up to 8-9 million tonnes. Even if 50% of it is used for blending, then your food basket will get disturbed. Since we import 60% of our requirement, naturally, if international prices move upward, our prices too will move accordingly.

 

Q: The SEA had been demanding a cut in import duties on edible oils to bring down the local prices. Subsequently the government revised its policy to accommodate your demand. But edible oil prices are still high. What happened?

A: What we had asked for was an increase in duty difference--higher on refined oils and lower on crude oil imports, and to facilitate better capacity utilisation of the domestic refining industry and value addition in the country. Now, in May, the government reduced the import duty on crude palm oil, crude soybean oil, and crude sunflower.

 

From November to May, farmers market their produce and so domestic availability is good in the first half of the year. After May and up to September, we are heavily dependent on imports. So, it is imperative for the government to cut import duty as this will ensure availability of edible oils for consumers at reasonable prices and at the same time, industry demand for a higher duty difference will be met, thereby, leading to import of more crude oil compared to refined. This will enable us to meet the self-reliance goal of the government.

 

In the initial stage, when the duties were reduced, industry definitely passed on the benefit. Price went down by about 5-6 rupees, or even 10 rupees, per kg, in some cases. But within 15 days, war broke out between Israel and Iran. This changed the entire scenario, and prices went up. And if we look at the data for last one month, prices have been on an upward trend for various reasons. Despite all these shifting dynamics, even today, the overall prices for consumers are lower to the extent of 3-4 rupees per kg.

 

Another issue relates to prices of mustard rapeseed oil. Mustard oil is widely consumed in northern India and eastern India. There is no substitute for the mustard oil. Mustard is pungent, and because of the pungency, the oil is being sold at a premium.

 

Earlier, everybody had assessed that the mustard crop in 2024-25 would be around 11.6 million tonnes. The government had assessed it at 12.6 million tonnes. But now, most experts in the industry think that the crop was lower than what was estimated earlier by the industry or by the government. Nobody has an exact number. But if you look at the data for last few months since February, the stock is diminishing. So, already you have consumed a large quantity of mustard. Hardly any quantity is left. So the price of the mustard oil has jumped to INR 140 per kg in June. It has gone up by INR 35-40 in the last two months and touched INR 167 in wholesale market.

 

There is a need to cool down the edible oil prices. NAFED, HAFED and other agencies are holding about 1.4 million tonnes of soybeans. Soybean harvesting is just two months away. Government may have to start buying at the Minimum Support Price of INR 5,328 per 100 kg. But you need space to store the new cargo and therefore, old stock needs to be liquidated before next harvest season starts.

 

So, it would be better for the government to sell soybeans. It will serve many purposes. One, price will cool down. Second, you have space to store the new soybean. And third, you can also release rapeseed for crushing.

 

On Tuesday, we had a meeting with the Reserve Bank of India officials. Normally, every month, we meet to review the price situation. We have given them these suggestions. Stock limits or other measures will not serve any purpose. That was in 1980, 1990 era. Currently, supply is ample. If you impose stock limits, it will not help you but will disturb the supply chain mechanism here.

 

Also, oil cake is facing a sort of weird problem in the market, because of the DDGS (Distillers' Dried Grains with Solubles--a product obtained in the process of making of ethanol). DDGS is replacing soybean meal in poultry and rapeseed meal and de-oiled rice bran in cattle feed. Industry is getting the lowest realisation for the oil meals. So, naturally, that will increase the load on the oil and oil prices will increase. If government supports the exports of oil meal and rapeseed by some incentives, that will reduce the pressure on edible oil prices.

 

Q: There was a problem of cheap imports from Nepal. Has the situation changed?

A: Earlier, Nepal used to import crude oils at nil import duty, process it into refined products and export it to India at zero duty, as part of SAFTA arrangement. This made their products cheaper, putting pressure on Indian refiners. Every month, 70,000-80,000 tonnes used to come this way from Nepal. But, with the Indian customs duty now reduced to 16.5%, the parity and margin have reduced. But still, we are getting some quantity from Nepal.

 

Since SAFTA is a bilateral agreement between India and Nepal, India cannot take a unilateral decision about duties. But you have a choice of canalisation through state agency or fixing the quota. We have suggested this to the government.

 

Q: The latest kharif acreage data show that the area under oilseeds this year is lower than last year. What implications can it have?

A: Definitely, it is lower, mainly because of the shifting of area from oil seeds to maize and pulses. The farmers look at where they get a better return. In particular, maize prices have risen to INR 28 per kg now from INR 15-18 a year earlier. So farmers have turned to maize, and its production is increasing.

 

Moreover, last year, soybean farmers did not get MSP rates and were discouraged. What I would suggest is that we must introduce a Bhavantar scheme, under which farmers will get the difference between the market price and the MSP, and the industry will get raw material at the market price. It is a win-win situation.

 

Q: With the festival season coming, are imports going to rise further in the coming months?

A: Imports of edible oil by India are already high. Normally, between November and May-June, we import 40% to 45% of our annual imports, and in the remaining second half, we import about 55% to 60%. Which means there is going be a rise in imports during the remaining months.

 

In the first half, we have kharif oilseed, and then we have rabi oilseed crushing, so we have better domestic availability from November to May or June. In the second half, domestic availability reduces, so imports increase.

 

At this point in time, imports are down by 8% from last year's level.

 

Imports were at 16.0 million tonnes last year, but this year import is expected to be slightly lower, maybe 15.5 million tonnes or less by 200,000-300,000 tonnes. The reason is that last year we had a good groundnut crop, we had a good soybean crop, so there is good carryover stock.

 

Q: As an association, are there any other areas of concern?

A: My concern is the low productivity of oil seeds. We are working on it. We have worked on how to raise production and productivity. If you remember, we had a programme for eight years in Gujarat and Rajasthan for raising castor productivity. And I'm happy to mention, when we started the programme in 2017-18, productivity was 1,300-1,500 kg of castor seeds per hectare in Gujarat.

 

Today, it is 2,200 kg per hectare and overall production has increased from 11-12 lakh (1.1-1.2 million) tonnes to 18-20 lakh (1.8-2.0 million) tonnes at present. We are educating farmers in better agronomics practices and the use of inputs. Every year, we used to set up about 500 model farms where we used to invite all the farmers in that area growing castor.

 

For mustard, we have been running the programme for last five years on model farms across Madhya Pradesh, Rajasthan, and Uttar Pradesh. In the last few years, we have established about 5,500 such model farms, and you will be surprised that productivity has gone up by 25% in model farms compared to the control farm. We have also established over 50 weather stations to give weather information to farmers. One weather station covers about 25-kilometre radius. One weather station costs INR 300,000 to INR 400,000. And that gives so much information to the farmers. It can detect climate changes from weather photographs. The message goes to over 50,000 farmers by SMS and audio message in vernacular language.

 

All this is working, but we have financial limitations to upgrade and extend this programme. Industry is funding us, so we are operating the programme to the extent possible.  End

 

Edited by Ashish Shirke

 

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