Sharp Drop in Global Edible Oil Prices Triggers Surge in Imports

According to the Solvent Extractors' Association of India (SEA), edible oil imports increased by 23.7% to 6.98 million tons (MT) during the November-March period (2022-23), compared to the same period last year.

The landing price of palm oil (at Mumbai port), which accounts for about 60% of the country's import basket, fell 42% to $1,030/ton on April 14 this year, from $1,791/ton the previous year.

Crude soy and sunflower oil landed prices have fallen by 45% and 53%, respectively, to $1,040/ton and $1,010/ton.

Higher imports have pushed down domestic mustard and soybean seed prices.

In March 2023, inflation in the oil and fats category fell by 7.86%. Farmers' groups and edible oil processors have urged the government to raise import taxes to put them in line with domestic edible oil pricing.

"Unrestricted imports of palmolein are causing a collapse in edible oil prices, which is affecting mustard marketing during peak harvest time and causing distress to farmers," SEA president Ajay Jhunjhunwala claimed in a communication to the food ministry.

Currently, crude palm, soybean, and sunflower oil imports are subject to a 5% agri-infrastructure cess and a 10% education cess, for a total tax incidence of 5.5%.

According to the Soybean Processors Association of India (SOPA), the price of imported crude soybean oil fell by 31% between September and March (2022-2023); similarly, prices of sunflower and palm oils fell.

"The steep fall in edible oil prices has resulted in a fall in oilseeds prices, and farmers are disappointed and discouraged by this policy of keeping duties very low, even after world edible oil prices have crashed," Davish Jain, chairman of SOPA, stated in a communication to the commerce ministry.

India imports approximately 56% of its 24-25 MT yearly edible oil usage. Each year, approximately 8 MT of palm oil is imported from Indonesia and Malaysia.

Despite the government's commitment to purchase oilseeds from farmers at MSP after two years, mustard seed mandi prices remain below the MSP of Rs 5,450/quintal announced for the season.

Mustard prices are currently reigning at around '5,100-5,200/quintal at Bharatpur mandi in Rajasthan, the centre of the oilseeds trade; the prices are the lowest in two years.

"Cheaper imports of edible oil, such as palm oil, along with low import duties, have resulted in a decline in demand for mustard seeds this season," Krishan Kumar Agarwal, president of the Bharatpur Oil Millers Association, told FE.

Domestic edible oil sources include mustard (40%), soyabean (24%), groundnut (7%), and others.