Besides lower offtake due to Coronavirus by the hotel, restaurant and catering segment, which makes good use of palm group of oils, imports were affected by a couple of initiatives taken by the Modi government
Imports of edible oils, particularly RBD palmolein, into India will likely be lower over the next six months until the hotel, restaurant and catering (HoReCa) sector recovers fully from the impact of the novel Coronavirus (COVID-19) that had affected the sector’s functioning.
Edible oils import, most of which is used for cooking, dropped to a five-year low last season (November 2019-October 2020) to 13.52 million tonnes as the HoReCa sector was affected by the lockdown announced by the Indian government to tackle COVID-19.
Restaurants have been permitted to operate on a limited scale since June when takeaways were permitted. Even now, the sector has to follow quite a few standard operating procedures to conduct business.
“It will take at least six months before HoReCa sector returns to normality. It will have an impact on edible oil consumption,” said B V Mehta, Executive Director, Solvent Extractors Association of India (SEA), the apex body of oilseed crushing units in the country.
Palm oil imports, in particular, are likely to remain subdued until restaurants and hotels begin to see an improvement in business.
After having imported around 10-11 million tonnes annually until 2013-14, edible oil imports zoomed to over 14 million tonnes since 2014-15 before hitting a record 15.07 million tonnes in 2016-17.
Edible oil imports are among the top five commodities that account for a heavy outflow of precious foreign exchange from India. Over Rs 75,000 crore is being spent annually on these imports over the last couple of years.
One of the features of last season’s lower edible oil imports is the drastic decline in shipments of RBD (refined, bleached and deodorised) palmolein into the country.
RBD palmolein imports plunged to 0.42 million tonnes last season from 2.73 million tonnes the previous season.
The season also saw the share of palm group of oils import dropping below 60 percent after three years.
Besides lower offtake due to Coronavirus by the HoReCa segment, which makes good use of palm group of oils, imports were affected by a couple of initiatives the Narendra Modi government undertook last year.
In September last year, the Union government imposed a five percent safeguard duty on RBD palmolein and palm oil and then brought it under the restricted list of imports from January 8 this year.
If a commodity is placed in the restricted list, importers will have to get clearance from the Directorate-General of Foreign Trade to ship them into the country. Such a move automatically leads to a drop in imports as a government is seen generally discouraging such shipments.
In addition, India discouraged imports of palm oil from Malaysia, one of the major producers, due to souring of bilateral relations during the Mahathir Mohamad regime and cracked down on imports from Nepal, which hardly produces any palm oil.
“The lower imports improved the refining capacity of Indian solvent units to 55-60 percent,” Mehta said.
Though imports of crude palm oil increased last season, it was only marginal. Shipments of soft oils such as soybean and sunflower also increased by 0.45 million tonnes mainly on demand from the household sector.
The lockdown has seen a rise in the consumption of various items by the household sector.
“Though oilseeds and edible oil prices have increased in recent weeks, the rise has not affected the consumer significantly. There could be a Rs 30-40 spike in the monthly edible oils bill for a family,” Mehta said.
On the other hand, Indian farmers are benefitting from the lower imports as well as the rise in oilseeds prices.
“Oilseed prices are ruling higher than minimum support prices (MSP) fixed by the government. Prices are up due to global factors even as China and India continue to buy,” the SEA official said.
Currently, prices of soybean are ruling at Rs 4,400 a quintal against the MSP of Rs 3,880, while sunflower is quoted at Rs 5,700 a quintal against the MSP of Rs 5,885. Groundnut for crushing is selling at Rs 6,200 a quintal against the MSP of Rs 5,275.
In the domestic market, palm oil is quoted at Rs 86 a kg against Rs 63.76 a year ago. Refined soybean oil is ruling at Rs 94 a kg against Rs 74.92 at the same time a year ago. Groundnut oil is ruling at Rs 133 versus Rs 99.77 and refined sunflower at Rs 115 against Rs 82.77 a year ago.
Prices of edible oils are ruling nearly 35 percent higher than last year mainly in view of a firm trend global.
In the world market, soybean prices have gained on fears of lower crop due to drought in Brazil, shipment problems in Argentina, and palm oil output being affected in Malaysia and Indonesia.(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)