Edible Oils Demand Hit by Rising Prices: Solvent Extractors' Association

Despite a steady growth in demand for edible oils from HoReCa (hotels, restaurants, and catering), the Solvent Extractors' Association (SEA) of India believes that imports of vegetable oils would fall below 15 million tonnes (mt) for the second year in a row during the current oil year 2020-21 (November-October).

Addressing the members of the SEA of India at its 50th annual general meeting (AGM) in Goa on Thursday, Atul Chaturvedi, President of the SEA of India, predicted that edible oil imports will be closer to 13.4 million tonnes for the oil year 2020-21, up from 13.17 million tonnes the previous year. He attributed this to less demand as a result of higher prices and demand destruction induced by Covid.

“In the past, we used to have nearly one million tonnes of imports that grew year after year. I've noticed that demand and imports have plateaued at around 13.2 mt or 13.4 mt over the last two years,” he said.

Slow consumption rise

“Much has been said over the last year about demand destruction, Chaturvedi added later at the SEA Awards ceremony. Out-of-home consumption has stabilised, albeit at a somewhat lower level, while demand from the HoReCa segment slowly increases.”

He said, “Due to unprecedented high prices of vegetable oils in the international market, the country's imports are projected to fall below 15 mt for the second year in a row”.

Chaturvedi addressed members at the AGM and said “oilseed planting this year is estimated to be around 19.3 million hectares (as of September 9) compared to about 19.6 million hectares last year at the same time. This means that the same amount of oilseeds will be planted this year as well.”

He stated that during the financial year 2020-21, oilmeals exports were around 3.7 million tonnes valued at around Rs.8900 crore, up from 2.43 million tonnes valued at Rs.4500 crore the previous year.

Free Trade Pacts

In response to the government's plans to renegotiate free trade agreements (FTAs) and bilateral trade agreements, he stated that the Indian vegetable oil industry must actively participate in the process in order to protect the industry's legitimate interests and correct the anomalies that have inadvertently crept into previous agreements.

In the case of vegetable oil imports, the SEA stated that the importing country's import duty is limited. To ensure a level playing field, trade agreements should include similar restrictions and regulations on export duties and levies.

He stated that the earlier ASEAN agreement did not include a provision for ‘Bilateral Safeguard Duty,' and that it is therefore necessary to include a provision for ‘Bilateral Safeguard Duty' in the revised agreement so that, if excessive imports harm domestic industry, automatic additional duty can be imposed without having to go through the time-consuming process of filing papers for 'Safeguard Duty'.

Zero duty Import

According to Chaturvedi, the government issued the Customs (Administration of Rules of Origin under Trade Agreements) Rules 2020, also known as ‘Carotar 2020,' on September 21, 2020, to allow Customs to verify compliance with ‘Rules of Origin' in order to claim a favourable rate of duty. Nations like Nepal and Bangladesh continue to break the ‘Rules of Origin' with impunity, he added, adding that exports from these neighbouring countries are flooding Indian markets at zero duty, endangering the industry's viability. “We encourage our central government to implement ‘Carotar 2020' to protect the interests of our domestic industry while also ensuring revenue loss to the exchequer is avoided,” he said.

The Government introduced the Scheme for Remission of Duties and Taxes on Export Products with effect from January 1 2021 after the discontinuation of the MEIS (Merchandise Exports from India Scheme). He said the rates notified for exports of most of the oilmeals are only half a per cent of the FOB export price.

“This is way below what we received under MEIS and does not fulfil the objective of refunding all the taxes incurred in exports. We urge the Central government to offer us realistic RoDEPT rates for all the export commodities under the oilseeds, vegetable oils, oilmeals and their derivatives,” he said.