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INTERVIEW: SEA sees India edible oil buys at 7-yr-low on pandemic hit

Informist, Friday, Mar 26, 2021

 

By Kaushal Verma

 

NEW DELHIWith the pandemic curbs eating into bulk demand, India's edible oil import is set to fall to a seven-year low of sub-13 mln tn, a level last seen in the marketing season ended October 2014, says B.V. Mehta, executive director of The Solvent Extractors' Association of India, in an interview to Informist.


"Due to coronavirus, HORECA (hotel, restaurant and catering) segment is not fully functioning, which is also changing eating habits," said Mehta. 


It has been a year since the coronavirus pandemic wreaked havoc on human lives and livelihoods world over, and consumer demand remains fragile. Among industries directly hit is the hotel, restaurant and catering, and then there are many sectors suffering collateral damage – edible oil being one. The food business is a top consumer of edible oils in India, with around 40% share.    


Now, with COVID-19 cases surging once again in urban India, the demand for edible oil has been hit, Mehta said.
 

The country is currently witnessing a fresh wave of infections, with new strains of the virus being detected in many states.  

 

Many major states still have strict restrictions for the number of attendees at social gatherings. For instance, Mumbai, currently recording all-time high daily infections, has capped the number of people attending weddings and funerals at 50 and 20, respectively.


It's a stark contrast to the situation before the pandemic struck. 

 

"In marriage functions, around 2,000-5,000 guests used to dine together," says Mehta, recounting the busy wedding season for the edible oil sector. The demand from the hotel, restaurant and catering segment may revive only once lockdowns are lifted and fear of contracting the virus fades, he says.


A likely bigger oilseed harvest may also trim the country's edible oil imports, says Mehta. India, world's largest importer of edible oils, is seen producing 1.0-1.5 mln tn more of edible oils this year.
 

Yet another factor deterring imports is the high global prices of edible oils. Prices of key edible oils in the global markets are hovering around a decade-high level due to supply constraints in the major producing nations.    

 

DUTY DILEMMA
On reports that India may slash import duty on edible oils to cool record high domestic prices, which have been reflecting the overseas trend, Mehta says any such move would help little in the current context.
 

"The origin countries typically impose countervailing duties to negate the change in import duty in our country," he said. "A duty cut will not benefit the end consumer."

 

A duty cut leads to cheaper imports, which eventually weighs on prices in domestic markets (and eventually the global market as India as world's top edible oil buyer fulfils more than half its requirement through imports).  

 

The industry body has suggested that the government should expand the scope of edible oil supply under public distribution system to the middle class at subsidised rates, and also freeze the tariff value for around six months. 

 

"If the government really wants to slash the duty, it should wait for the right time," says Mehta, citing the issue in mustard, a key oilseed crop. "They (mustard farmers) are bringing crops to the markets and a price crash at this time will disappoint them."

 

OILMEAL EXPORTS
Though COVID-19 may have dampened the sentiment for import of edible oils, Mehta sees record overseas sales of oilmeal in the current financial year ending this month.

   
"In March, around 400,000 tn exports are expected," he says. "Total exports this year are seen higher… I think it's a record."


Oilmeal exports in 2020-21 are estimated at 3.8 mln tn, against 2.4 mln tn last year, Mehta says. Firm demand for rice bran meal from Bangladesh and Vietnam, soymeal from Iran, and castor meal from South Korea and Taiwan may lift overall shipments to an all-time high this year. 
 

Mehta says the demand for rice bran meal from Bangladesh is so robust that exporters are facing an acute shortage of railway containers. "If we get the rakes in time, rice bran meal exports (to Bangladesh) may rise further… We have written to the commerce ministry to improve availability of rakes."

 

CASTOR OIL EXPORT
Apart from oilmeal, exports of castor oil, an industry oil, are also seen robust and are estimated at nearly 650,000 tn this fiscal, up 19% on year, Mehta says. 


"The rise in overseas shipments of castor oil is due to strong demand from China." The Asian country accounts for around half of India's non-edible oil exports. 


Castor oil is used to make sebacic acid, a raw material for pharmaceutical, plastic, cosmetics, candles and painting materials. 


India is the world's largest producer and exporter of the industry oil.  End
 

 

Edited by Ramya J.S. D'Rozario

 

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

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