Centre Plans To Provide Edible Oil For PDS Supply

JAIPUR: The central government would supply edible oil, either soya or palm oil, through public distribution system (PDS) from June, food secretary T Nanda Kumar told reporters here on Wednesday.

One kg of oil per month per family would be provided on subsidised rate to beneficiaries of below poverty line (BPL) and Antodya-Ann-yojna from June next, Mr Kumar, who also holds PDS portfolio, said.

About one million tonne of edible oil has been ordered and it would be landing anytime in May, he said, adding that one kg of oil would cost around Rs 42 to beneficiaries after providing a subsidy of Rs 15 per kg. All state governments have been advised to place their requirements, he added.

There is no shortage of foodgrain in PDS system in the country to meet the target of 27 million tonnes wheat and rice for BPL, Mr Kumar said. He said despite of chilly weather and frost, wheat production has touched 76 million tonnes, which was 0.8 million tonnes more than the previous rabi season.

Similarly, rice production has risen to 96 million tonnes this year, about 2 million tonnes more than last year, he said.

On a question how to contain hoarding of foodgrain and essential commodities, he said, the stock limit is the state governments’ subject, and they were told to do it according to the requirement.

About 5 lakh tonnes of wheat have been procured in Rajasthan so far, as against a target of 14 lakh tonnes, he said, adding it would be done by FCI and the state-run agencies like Rajfed.

Minimum support price of wheat has been raised from Rs 850 per quintal to Rs 1,000 and it is quite competitive in the market for growers, he said.

Import Of Refined Edible Oils A Safer Option

Mumbai: As part of its ongoing exercise to contain inflation and augment supplies of essential food items, the Centre has decided to import up to 10 lakh tonnes of edible oils for supply through the public distribution system.

The imported oils would be refined and/or packed locally and sold at a subsidised rate — that is Rs 15 a litre below cost.

The move is sure to have a salutary effect on open market prices. This decision is something the Government ought to have taken two years ago.

Its failure to do so has meant consumers suffered unnecessarily and in some sense, short-changed.

But how well is the latest welcome decision going to work on the ground? Is there a more effective way of dealing with the price crisis, as far as edible oil is concerned?

Reports from the markets suggest that the Government parastatals such as NAFED and PEC have already issued a tender and begun to contact refiners and packers to handle the imported material.

A good strategy

Communication from these agencies indicates that crude oil would be imported for refining and packing locally. This may not be a good strategy after all.

Importing crude oil, getting it refined and packed locally is an onerous task, which will involve multiple handling, processing losses and more critically, time lag between crude oil imports and final product reaching consumers.

There are uncertainties in this long drawn out process, in addition to accounting issues.

This is a potential area for some people to make unearned profits. The intended purpose of the policy decision — to augment availability and rein in prices — stands the risk of being defeated in the event of hitches and time lags/delays.

Ort refined oil

On the other hand, import of refined oils would be a much safer option. Refined oils are readily marketable. Refined oils imported in bulk can be quickly moved to consuming centres in bulk, packed and distributed. The time lag would be considerably reduced, so will be the cost. This will have an immediate salutary effect on market prices. The speculators’ propensity to take advantage of price movements would be curtailed.

If the Government is really serious about gaining an upper-hand over the edible oil market, it would be advisable to import refined oils, that too without customs duty. The current rate of duty is 7.5 per cent.

O-duty refined oils

While there is a strong case for complete waiver of customs duty on refined oils for all categories of importers, the least the Government can do at this point of time is to allow duty-free import of refined oils by State agencies for supply through PDS.

The domestic oil lobby would of course raise objections to duty-free import of refined oils. There would be loud protestations that the domestic refining industry would suffer and oilseeds growers would be hurt. These simply are exaggerated scare the domestic industry keeps raising from time-to-time. The industry stands to lose little even if refined oils are allowed at zero duty.

The domestic players have made enormous profit in the last one year and more as a result of a rising market. They would of course hate to see a squeeze on their opportunity to continue to profit from market conditions. At least for the next six months, the Government must brush aside all such objections and ensure the really poor and needy get cooking oil at rates they can afford. Today’s priority is not the industry, but the aam aadmi in whose name the present Government rode to power four years ago.

There already are representations from the industry that a sharp decline in vegetable oil prices — following the recent precipitate action by the Government — may affect oilseed planting in the ensuing kharif season.

There is little evidence that oilseed growers are worried about the fall in cooking oil prices.

After all, growers are consumers too. Also, oilseed prices are still ruling above the minimum support price. So, far from hurting growers, the recent price fall is seen hurting the vegetable oil industry and trade. The shrill protests come as no surprise.

Sluggish Demand Softens Edible Oils

New Delhi: Select edible oil prices drifted between Rs 50-150 a quintal in the wholesale oils and oilseeds market on Thursday owing to slow down in buying by millers and pick up in imports of edible oils.

Non-edible oils, on the other side, continued to be traded around previous level on some deals. Traders said apart from reduced offtake by millers, reports of a rise of about 38 per cent at 22.64 lakh tonnes of edible oils in the last five months also helped prices to decline.

They said reports of a near normal monsoon this year, forecast by the meteorological department was another factor behind fall in the prices.

In the edible section, groundnut and cottonseed mill delivery oil prices were down by Rs 50 each at Rs 7,050 and Rs 5550 per quintal respectively. Sesame mill delivery oil lost Rs 150 at Rs 7,650 a quintal on poor offtake.

Mustard expeller oil in line with general trend quoted lower at Rs 5,600 a quintal as against last close of Rs 5650. Rice bran (physical) oil also lacked necessary buying support and dropped to Rs 4550 a quintal from Rs 4,600.

No Stock Limits For Imported Edible Oils

Chennai: The Union Government has clarified that the stock limit, being enforced under the Essential Commodities Act, 1955 will not apply to imported edible oils.

In an order passed on April 7, the Ministry of Consumer Affairs, Food and Public Distribution said the order to further amend the Removal of (Licensing requirements, Stock Limits and Movement Restrictions) on Specified Foodstuffs Order, 2002 would be kept in abeyance for commodities such as edible oils, oilseeds and rice for one year.

Declaration

It would also not apply for transport distribution or disposal of edible oils, oilseeds and rice to places outside the State and also to import of these commodities. However, importers may be directed by the Centre or States to declare receipt of stocks and quantity retained by them.

The order follows representation from the industry complaining harassment by particularly State Government officials. They had especially complained of harassment in Maharashtra.

Officials said the Maharashtra Government was told by the Centre not to harass importers in particular.

Govt Should Not Allow Edible Oil Prices To Drop Further

Chennai: With the prices of edible oils easing following a series of measures taken by the Union Government, the Solvent Extractors Association of India has urged the Centre to ensure that the market stabilises and prices are not allowed to drop further.

The Centre could also urge the State Governments to restrain from taking action against the industry and trade under the Essential Commodities Act, it said in a memorandum submitted to the Food and Civil Supplies Secretary, T. Nandakumar.

“Duty cuts on edible oils in the last one month coupled with a fall in international prices have had a severe impact on domestic prices of edible oils and practically, most of the popular oils have declined by over Rs 10,000 a tonne in the wholesale market in one month,” it said in its memorandum.

Edible oil manufacturers had passed on the benefits of customs duty to the consumers and they themselves had cut the prices by Rs 5-7 a kg. But despite the cut an uncertainty existed in the market, it said.

This was due to rumours of curbs on futures trading, implementation of storage control order and reluctance of importers to enter into new contracts.

This could deplete the stocks in the pipeline and in turn, lead to rise in prices from the next month, the solvent extractors body said.

“Raids and harassment by the officials of Civil Supplies of the Department of State Governments have further depressed the market.

“If prices were further reduced, we are afraid, it would discourage the farmers to undertake oilseed cultivation in the ensuing kharif season and would be counter-productive to our objective to increase the production of oilseeds to reduce our dependence,” it said.

The Government should ensure the market is stabilised at a level that would be comfortable to consumers as well as the farmers.

Duty Waiver: Edible Oil Mkt In A Mess

Mumbai: The domestic vegetable oil market is in a mess following the sudden decision of the government to allow crude oil imports at zero-duty.

No doubt, there has been a steep fall in open market prices of various oils; but there is a standoff between sellers and buyers over settlement of outstanding contracts.

As a result, it is highly likely that the full benefit of the tariff decision may not accrue to consumers.

Sellers and buyers are still haggling over the price at which contracts have to be settled or performed. Many of the importers had pre-sold their imported cargo even before the arrival of the ship, assuming the duty to remain unchanged.

They have reaped windfall gains in the form of complete waiver of customs duty.

They are said to be forcing local buyers (many of them operate on modest scale) to take delivery of the cargo at the contracted price which obviously was much higher than the market rate after March 31.

Buyers contend that the purchase price was based on assumption that the rate of customs duty would not change.

Now that the duty has been withdrawn (and importers do not have to pay any money as customs duty), the contracted price should be marked down correspondingly, they argue. In other words, how to share the money saved on account of customs duty waiver is the point of dispute.

Terms of contract

Edible oil trade is a continuous business, done on the basis of past relationship and trust.

The terms of contract between sellers and buyers are often arbitrary and are generally loaded in favour of large sellers (read, refiners). The sudden decision to scrap customs duty has thrown the trade out of gear.

Large importers are being accused of squeezing small traders. Several trade intermediaries Business Line spoke to confirmed that there was lack of clarity on contract terms, and the parties to the contract were fighting over terms of settlement. A sharp fall in local market pries from April 1 onwards has put most of the local buyers in a defensive position.

Many are reluctant to take delivery of high priced goods as they would end up incurring huge losses because of the price fall. Sane voices within the vegetable oil trade strongly advocate streamlining of the cash market.

They suggest adoption of standard terms of contract for local business, including terms of settlement in the event of revision (upwards or downwards) in customs duty and other taxes.

“Unless the cash market is cleaned up and systematised, consumers may be denied the benefit of duty cuts,” asserted an intermediary.

Price disparity

Meanwhile, local prices have fallen so much that there is today a price disparity of about $40 a tonne (around Rs 1,600 a tonne) between the landed cost of imported oils and domestic market prices. Domestic prices are lower than imported ones.

This has resulted in a slowdown in purchases by Indian importers.

So far, about 60,000 to 70,000 tonnes of oils — comprising 25,000 tonnes of soyabean oil and about 40,000 tonnes of crude palm oil — are reported to have been purchased.

In addition, apprehensions over imposition of storage restrictions are seen putting importers off. A worrisome aspect is that pipeline stocks are depleting. If the disparity continues for some time and Indians do not return to the overseas market, domestic prices may begin to move up.

Once that happens, importers here will all rush abroad to buy oil, which in turn can push international prices up.

Taking stock

New Delhi needs to take cognizance of what’s going on the country’s vegetable oil market. The measures initiated to fight inflation may come to naught if the industry and trade does not work in harmony.

The government can ill-afford to remain indifferent to trade issues in the marketplace.

The derivatives market continues to remain jittery over threat of a ban on futures trading.

There has recently been a lot of pressure on the government by various political outfits to stop online trading in commodities.

Some interest groups are reportedly camped in the capital to stave off the threat.

Edible Oil Price Recovers On Low Level Buying Support

NEW DELH: Edible oil prices recovered in the wholesale oils and oilseeds market here today on fresh arrivals.

Buying support at low levels mainly influenced trading sentiment to some extent and edible oil prices rose in the range of Rs 50-Rs 200 a quintal.

Soyabean refined mill delivery and rice bran (phy) oils recovered by Rs 200 each to Rs 5,900 and Rs 4,400 a quintal on revival of buying.

Soyabean degum delhi oil price also rose by Rs 100 to Rs 5,750 a quintal on fresh buying support. Palmoline (rbd) swifted by Rs 190 to Rs 5,740 a quintal on heavy buying interest and crude palm oil ex-kandla gained Rs 50 to Rs 4,500 a quintal.

Mustard expeller and cottonseed mill delivery oils too found fresh support due to increased offtake by vanaspati mills and traded higher at Rs 5,740 and Rs 5,580 from Rs 5,650 and Rs 5,550 a quintal respectively.

Duty Cut: 'No Gain To Consumer’

Ahmedabad: Edible oil companies, which have started reducing prices to between Rs 2-6 a kg recently following import duty reduction announced by the Government last week, feel that the ordinary consumer can benefit only when duty is reduced on soya oil as well.

On March 20, the import duty on crude palm oil, including crude palmolein, was slashed from 45 to 20 per cent and that on refined palm oil, including RBD palmolein, from 52.5 to 27.5 per cent by the Centre. While welcoming the import duty reduction on these oils to improve supplies, oilseed crushers and manufacturers in Gujarat maintain that the actual beneficiaries of the Government move were hoteliers, bakeries and the vanaspati industry which use huge quantities of palm oil and they are unlikely to pass on the price reduction to the consumer.

The common consumer — in many parts of central and western India — uses soya oil for household cooking, which has seen no price reduction. Vijay Gupta, Chairman and Managing Director, Gujarat Ambuja Exports Ltd (GAEL), an oil-maker, told Business Line on Tuesday that the prices of all edible oils could go down further by Rs 3-4 per kg if the Government reduced duty on soya oil as well to 20 per cent.

Unless all edible oils are provided a level-playing field, the prices of this essential commodity can hardly benefit the actual consumer.

Repercussions

An official of Adani Wilmar Ltd, makers of Fortune brand edible oils, said reduced prices of palm oil have pushed some consumers towards it; ironically, the price of palm oil in Gujarat has gone up by Rs 3 per kg during the last two days.

As a result of import duty cut, Gokul Refoils reduced the palm oil prices by Rs 4 a kg, while KS Oil announced a price cut of Rs 2 a kg on mustard oil.

Similarly, cottonseed oil, used mainly for frying purposes, has seen prices go down by Rs 3 a kg.

Edible Oil Prices Shoot Up By 20-50%

Hyderabad: After gold, it is the turn of edible oils to get affected by international factors. Consumers, who have witnessed huge increase in the prices of the yellow metal in the last few weeks, are in for yet another shock. Run-up to Budget 2008-09

Prices of edible oil have shot up 20-50 per cent due to a sharp rise in the price of raw oil globally.

While the price of sunflower oil (packed) has gone up to Rs 100 from Rs 78, soya oil reached Rs 70 (Rs 55) and rice bran oil Rs 66 (Rs 44).

Bio-diesel factor

“This is largely attributed to huge sops being given to bio-diesel by countries in the European Union,” said O.P. Goenka, a national expert on edible oil and former President of the Federation of Andhra Pradesh Chambers of Commerce and Industry.

“The EU member countries offer huge subsidies and high prices for bio-diesel. Encouraged by this lucre, part of crude palm oil and rape seed oil stocks are being diverted to units that produce bio-diesel,” he said. This has resulted in scarcity, raising prices globally.

Rajender Prashad Agarwal, President of AP Oil Millers’ Association, said the price of soya oil in the retail market had gone up to Rs 70 a kg from Rs 55 a month ago. “International price for this soft oil is ruling at $1,450 a tonne,” he said. He said about 20 per cent of edible oil source was going to the bio-diesel industry, leading to a sudden shortage for the edible component.

Some good news

However, there is good news. The phenomenal increase in cotton and groundnut production have helped in stabilising cottonseed and groundnut oil.

While international developments resulted in rising prices, increase in domestic consumption of edible oil is also a contributing factor.

“Per capita consumption, which was hovering as low as 5-6 kilograms annually increased to 11-12 kilograms this year. The rise was up to 40 per cent in the last two years,” Goenka said.

This was due to a sharp increase in purchasing capacities of the consumers across the country. Agarwal suggested removal of the four per cent value added taxon edible oils as it benefited the farming community.