Indian Edible Oil Producers Hit Hard by Cheap Palm Oil Imports

After 30 years of soaring demand, Indian oilseed producers and processors are now using a fraction of their capacity and are shuttering operations as the market is flooded with cheap palm oil from Indonesia and Malaysia. While India has a crushing capacity of 30 million tons, the industry is operating 30% below capacity because of a lack of oilseed stock.

Malaysia palm oil prices have fallen to a six and a half year low, driving Indian imports from overseas to exceed a value of $10 billion per year – India’s third highest import expenditure after oil and gold.

"In the next year, palm oil imports could rise up to 10 million tons from around 9.3 million tons this year. At the current price level other oils can't compete with palm oil," said Nitesh Shahra, president of the refinery division of Ruchi Soya, the country's biggest edible oil refiner.

Within the past few years, India’s dependence on imports has risen from 30% to almost 70%, and officials are warning that this percentage will increase unless the administration makes oilseed remunerative for farmers by increasing import duties.

Over the past 20 years India’s edible oil output has increased by about one third, whereas imports have increased 12-fold to 14.4 million tons, making the country the world’s top buyer.

Domestic soybean prices have fallen by 20% in four months, but despite this decline, soyoil is still 50% more expensive than imported palm oil, discouraging farmers from increasing their production.

The country’s finance minister is considering requests for an increase in import duties on crude edible oils from 7.5% to 25%, and an increase in import duties on refined edible oils from 15% to 45% according to government sources, Reuters reports. The government is also considering buying oilseeds directly from farmers and increasing state support for the production of rapeseed, soybeans and peanuts.