Date:02/02/2006 URL: http://www.thehindubusinessline.com/2006/02/02/stories/2006020201631600.htm

Back Market agog with reports of curbs on soya oil import

G. Chandrashekhar

Mumbai , Feb. 1

THE vegetable oil market is agog with reports of the Government toying with the idea of restricting soyabean oil imports. These reports have created a flutter in trade circles, although no confirmation is forthcoming from any Government official.

Large-scale soyabean oil arrivals in recent months (encouraged by weakening global falling prices and lower customs duty) are seen cutting into the market share of palm oil in India.

Reports circulating in the market suggest that the Government may impose a tariff rate quota (TRQ) on soyabean oil. TRQ on soya oil would mean that the rate of 45 per cent customs duty would be charged on imports of up to a specified quantity, beyond which a higher rate would be applicable.

The WTO-bound peak rate of customs duty on soya oil committed by India over 10 years ago is 45 per cent. The country cannot unilaterally place soya oil under TRQ and charge a rate higher than 45 per cent.

Another suggestion doing the rounds in the market is that if the Government cannot impose a tariff barrier (such as TRQ), it would impose a non-tariff barrier, such as restricting import of soyabean oil crushed out of genetically modified soyabean. While this route is appealing and less onerous, the Government is unlikely to muster political courage to impose such a non-tariff barrier.

Also, the requisite wherewithal to closely monitor such imports is not in place. This suggestion was made nearly three years ago and repeated on occasions; but nothing came out of it.

During the oil year ended October 2005, soya oil imports aggregated a record 20.25 lakh tonnes, substantially higher than 8.9 lt of the same period the previous year. There has been no respite since the beginning of the new oil year in November 2005.

While a section of the industry players is demanding a squeeze on imports, it is unclear who is likely to benefit from the proposed restriction. Indian soyabean growers have been receiving prices in excess of Rs 11,200 a tonne, while the minimum support price is Rs 10,100 a tonne. There is nothing to suggest that growers are unhappy, while soya oil prices have been consumer-friendly.

If the past is any guide, someone could be playing the market by floating reports of a restriction being contemplated on soya oil imports.

Representations from industry and trade associations have reportedly been sent to the Government to examine the issue.