India's Edible Oil Imports May Surge to Meet Domestic Shortfall

By Thomas Kutty Abraham

July 4 (Bloomberg) -- India may increase edible oil imports by more than 80 percent in the four months to October, straining global stockpiles, to meet a shortfall in domestic supplies and cool the fastest inflation in 13 years.

Average monthly imports by the world's second-biggest buyer of cooking fat may total 550,000 tons, compared with 300,000 tons bought in April and May, Govindlal G. Patel, managing partner at Dipak Enterprise Ltd., said in a phone interview. Patel, 69, has been trading the commodity for more than four decades.

Increased imports may further deplete global reserves of vegetable oils, supporting palm oil prices that have climbed 19 percent this year. Soybean oil has surged 39 percent in the same period in Chicago on concern that supplies, reduced by the U.S. Midwest floods, will trail demand.

``Imports will be the only channel of supply for India as it enters the lean period as far domestic supplies are concerned,'' Patel said from the western Indian city of Rajkot. ``We are going to see more imports.''

Palm oil futures in Malaysia, the global benchmark, traded near a two-week high today at 3,618 ringgit ($1,107) a ton. The price has risen 40 percent in the past year. Soybean oil futures gained 0.4 percent to 69.17 cents a pound overnight in Chicago.

Palm oil, typically used as cooking oil or in soaps, is the world's most-consumed vegetable oil and can be mixed with diesel to stretch fossil fuel supplies. Soybean oil, the main rival, is used in food as well as for biodiesel. Both the commodities rose to records on March 4.

Government Curbs

India's edible oil imports in May fell 39 percent to 302,345 tons from 494,184 tons a year earlier, after private traders cut inventories of the commodity because of local government curbs on stockpiling, according to the Solvent Extractors' Association, a trade body comprising 800 oilseed processors.

``The restrictions have reduced the stocks in the pipeline and pushed up local edible oil prices,'' Patel said.

Prime Minister Manmohan Singh's government has scrapped the import duty on crude vegetable oils and asked state-run companies to import and sell 1 million tons of the commodity through ration shops at subsidized rates in year to March 31, 2009.

``The government may think of abolishing the import duty on refined edible oils as well as a last resort,'' Patel said. ``It has done everything possible to control prices.''

The imports, second only to those of China, rose 15 percent to 2.54 million tons in the seven months ended May from the same period a year earlier, the trade body said. Palm oil purchases climbed 40 percent to 2.3 million tons in the period from a year earlier, according to the solvent extractors' group.

Purchases may total 5.2 million tons in the year to October, up 11 percent from last year, Patel said.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.