Indian farmers, refiners suffer on spurt in edible oil imports

A surge in the import of vegetable oils in India has prompted the domestic oilseed crushing and refining industry to cut operating capacity by 30 per cent to a historic low in order to sustain in the business for future.

The apex industry body, Solvent Extractors’ Association (SEA), reported 26 per cent jump in India’s import of vegetable oils (both crude palm oil or CPO and refined, bleached and deodorized or RBD) to 1.45 million tonnes in March 2019 versus 1.15 million tonnes in the corresponding month last year. In February also, import of vegetable oil had risen by 7.4 per cent to 1.24 million tonnes from 1.16 million tonnes in the comparable month a year ago.

Despite being a deficit country with around 60 per cent of India’s demand being met through imports primarily from Malaysia, Indonesia and Argentina, sustained growth in import has caused a major worry for domestic oilseed crushing and refining units. Since the imported refined oil is cheaper than the domestic counterpart, packaging units here prefer to buy refined oil from overseas suppliers and pack in local units for a safe profit margin.

Rising edible oil imports have serious repercussions on domestic oilseeds prices, with groundnut and rapeseed and mustard seed trading at a discount of nearly 20 to their respective minimum support prices (MSP) in the spot markets.

According to industry sources, oilseed crushing units and edible oil refineries have reduced their operating capacity steadily to below the sustainable level of 30 per cent to reduce their operating cost and make business viable.

Meanwhile, the share of refined oil in the overall import in March has sequentially risen steadily to 22 per cent in March from 20 per cent in February and 14 per cent in January this year. With profit margins narrowing for processing of CPO in domestic refineries, Indian processing units are focusing on import of more refined oil than crude oil. 

Indian vegetable oil processing units are facing another major fundamental issue. The European Union has decided to suspend use of CPO in bio-fuel due to which major producing countries like Malaysia and Indonesia are now focusing on supply of refined oil. Eventually, the supply of both CPO and RBD has been diverted to alternate major consumers like India and China. Consequently, India is becoming a dumping ground for vegetable oils.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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