A series of duty hikes on edible oils since August 2017 and a sharper increase in import duty for refined palm oil will make palm oil more expensive in India, credit rating agency CRISIL said in a recent report.
The average palm oil prices in the domestic market are set to increase 18-20 per cent year-on-year in oil year 2017-18, the agency said.
Consumption of major edible oils in India stood at 22 million tonne in oil year 2016-17 (Nov-Oct), and was valued at approximately Rs 1.4 lakh crore. Domestic production met only 30 percent of that demand; the rest was imported.
Palm oil is the most consumed edible oil by volume in India, with a share of roughly 40 per cent, followed distantly by soybean and mustard oils. However, domestic production of palm oil is limited, and over 95 per cent of the requirement is imported, mostly from the world’s top two producers – Indonesia and Malaysia. Consequently, palm oil imports constitute over 60 per cent of the edible oil imports basket today.
“We expect palm oil’s domination of India’s edible oil consumption basket to continue in the medium term. Demand is supported by a price conscious domestic market, especially in the east, and the fact that palm oil is the cheapest of the lot. Besides, there is healthy offtake from the commercial segment (restaurants, hotels, food processing), which accounts for nearly 45% of total demand,” CRISIL said.
On the global front, CRISIL said, the production of palm oil fruits is set to increase by 7% to 69 million tonne in oil year 2017-18, over the 10% increase seen in oil year 2016-17, driven by Indonesia and Malaysia.
India being the largest importer of palm oil in the world, and a key trading partner for both producing nations, lower imports resulting from duty increases could weigh further on international prices of palm oil in the near term, the rating agency said.