The onset of monsoon is likely to increase consumption of edible oil in the country by 10-15 per cent between June and July, compared with April-May. The demand will also be fuelled by a marginal decrease in edible oil prices by 2-3 per cent as the rupee is holding firm against the dollar, industry sources said.
India imports 15.1 million tonnes of edible oil to meet its domestic demand. So if the rupee weakens against the dollar, the import bill shoots up, and it also impacts prices at the wholesale and retail levels. Rupee, in the recent past, had crossed the 68-mark, making imported edible oil costlier.
India imports nearly 70% of its annual consumption of edible oil. Palm oil is the most consumed edible oil in India with a share of 40%, followed distantly by soya bean and mustard oil. However, domestic production of palm oil is limited. Nearly 95% of palm oil consumed is imported.
Palm oil is imported from the world’s top two producers, Indonesia and Malayasia.
The rupee is likely to be range bound in the short term. There are two factors that will affect the rupee. Interest rate hike and rise of US treasury yields will weaken the rupee. But falling crude oil prices will safeguard the rupee from depreciating.
A weak rupee and high import duty on palm oil with an expectation of oilseed acreage going up this year may not increase the import of edible oils this oil year (October 2017 to November 2018) compared with the previous oil year. High import duty on palm oil will curb imports of edible oils in the current oil year. Imports are not expected to cross last year’s level of 15.1 million tonnes. The increase, if at all, is expected to be around only 200,000 tonnes.