India’s Edible Oil Imports Reach Record as Palm Drops

By Thomas Kutty Abraham

Jan. 12 (Bloomberg) -- India, the world’s biggest buyer of vegetable oils after China, imported a record quantity of cooking oils last month as palm oil prices declined and local demand rose.

Purchases exceeded 700,000 metric tons, with palm oil making up more than 90 percent of the total, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., India’s biggest importer, said. Imports in October totaled 786,652 tons, the highest ever.

“There was a rush to import and stockpile as prices dropped and most people expected government to impose duty,” Shahra said in a phone interview. The South Asian country in April scrapped the tax on crude palm oil imports to bolster supplies.

An increase in purchases by India may help support palm oil prices that have climbed to a three-month high in Malaysia, the second-biggest producer of the commodity. The vegetable oil slid 53 percent in the second half of 2008, after reaching a record in March, as production exceeded demand.

March-delivery palm oil gained 3.5 percent to 1,988 ringgit ($557) a ton in Kuala Lumpur after the Malaysian Palm Oil Board said today stockpiles in December dropped from a record and exports rose to the highest, fueled by Indian demand.

Stockpiles declined 12 percent to 1.99 million tons, while exports climbed to 1.61 million tons, the board said.

India bought 519,032 tons of palm oil in November, up from 347,320 tons a year earlier, the Solvent Extractors’ Association said last month. Crude palm oil purchases climbed 1 percent to 363,578 tons from a year ago, the association said.

Edible oil imports in October totaled 786,652 tons.

Zero Duty

The government imposed a 20 percent duty on crude soybean oil imports in November to shield oilseed growers from duty-free purchases, while allowing crude palm oil at zero duty. The nation didn’t import any soybean oil in November.

“Most of what India is importing today is palm oil after the introduction of duty on crude soybean oil,” said Shahra. “Palm oil will continue to enjoy advantage over soybean oil because of the duty differential.”

Three weeks of gains in prices of Malaysian palm oil, the longest stretch since May 23, may deter India from restoring a tax on imports of the tropical commodity, Shahra said.

Prime Minister Manmohan Singh’s government, which must face elections by May, has reduced import taxes on edible oils, and limited exports of rice, wheat and rice to cool food prices.

“No government would want to push up prices of an essential commodity before elections,” Shahra said. “The duty on crude palm oil will not be raised now that the prices are going up”

India relies on overseas purchases to meet almost half its edible-oil demand. It buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil. The vegetable oil accounts for almost 90 percent of India’s edible oil imports.

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