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Low global rates keep edible oil steady

G. Chandrashekhar

A steep decline in domestic edible oil production in 1999-2000 following a setback to the oilseeds crop because of weather aberrations (215 lakh tonnes as against the annual target of 270 lakh tonnes and 1998-99 output of 253 lakh tonnes), shou ld, under normal circumstances, have made the domestic edible oil market volatile. But, thanks to low international prices and liberal imports, availability and prices of various edible oils have been steady over the past 12 months.

The increase in prices is somewhat pronounced in the case of imported oils, especially sunflower oil. The present prices of refined sunflower oil in consumer packs show an average increase of 10 per cent since June last year. Out of the country's annual consumption of 10 lakh tonnes sunflower oil, as much as 50 per cent is imported. Prices are dictated primarily by the rate of customs duty and the exchange rate of the rupee. In December 1999, the Government raised the rate of basic customs duty on impor ted refined oils by 10 percentage points to 25 per cent ad valorem with a 10 per cent surcharge and 4 per cent special additional duty thereon; but allowed crude oil (sunflower oil, soya oil) imports at a concessional rate of 15 per cent with a 10 per ce nt surcharge subject to actual user condition.

Again in June this year, refined oils were subjected to a higher duty of 38.5 per cent and crude oils 27.5 per cent duty. In addition, the rupee depreciated by close to 5 per cent since June last year and now stands at Rs 44.70 to a dollar. The current p rices reflect the impact of these developments.

The increase in the price of groundnut oil in consumer packs should be attributed to lower domestic production during the year. Postman enjoys a premium because of its brand equity. However, at the wholesale level, the prices of expeller (unrefined) grou ndnut oil have been considerably reined-in because of a large inflow of refined palmolein which blends well with the former. Despite lower domestic crop last year, gingelly (sesamum) prices have not exhibited any sharp upward movement. Lower export deman d for Indian sesamum meant less tightness in domestic supplies which is reflected in the largely steady sesame oil prices over the past several months.

The data has been sourced from Subhiksha, a Chennai-based supermarket chain. The data pertains to Chennai only.