Thu Dec 3, 2009 4:34pm IST
NEW DELHI, Dec 3 (Reuters) - Edible oil imports by India may rise as much as 8.5 percent in 2009/10 from record purchases last year, industry sources said on Thursday, as demand grows while local soybean and groundnut output falls after poor monsoon rains.
"We estimate at least a half a million tonne higher edible oil imports in 2009/10," said B.V. Mehta, executive director of the Solvent Extractors' Association of India.
Trade officials had initially forecast that imports by the world's top buyer would remain flat after the record 46 percent surge in 2008/09 as growth in consumption would be matched by higher local output, particularly of winter-sown rapeseed.
But dry soil after the worst monsoon in 37 years and high temperatures in the main-producing state of Rajasthan delayed planting, reducing crop area and potentially hurting yields.
Area under rapeseed was 5.45 million hectares last week, down 3 percent from a year ago.
"Initial euphoria over good prospects of winter oilseed has vanished," said Govindbhai G. Patel, managing partner of Rajkot-based trading firm Dipak Enterprise, and a respected trade official who has headed several trade and industry bodies in the past. While it was too early forecast the output of rapeseed, which is sensitive to temperature and is harvested from February, lower crop area had dampened sentiment, said Patel.
For a factbox on the rapeseed crop, please click: [ID:nDEL437470]
The failed June-September monsoon has already lowered soybean output by 4.5 percent to 8.5 million tonnes, the Central Organisation for Oil Industry and Trade (COOIT) has estimated.
LOCAL SUPPLY
Mehta said lower oilseed crop would cut local oil supplies at least by 300,000 tonnes in the year that began in November.
"I don't see any fall in imports as demand is not declining due to ever rising population," said a trader working with a global trading firm who did not wish to be named.
Patel estimated that in addition to the likely fall of 300,000 tonnes in domestic output, India's annual cooking oil consumption will grow by about 550,000 tonnes.
Other trade officials agreed with the estimate.
A part of the demand would be met by surplus imports of 150,000 tonnes, which have been carried forward from the previous year, said Patel, whose estimates are keenly watched by traders and analysts.
After meeting the domestic shortfall with carryover stocks, the country would need an additional 700,000 tonnes on top of last year's imports of 8.2 million tonnes, he said.
Surplus imports were triggered by concerns that the government may raise taxes on imports of edible oils, which account for more than half of Indian demand.
PRICES
Traders say lower prices helped increase Indian demand in 2008/09, and the industry would keenly watch crude oil prices and the size of the soybean crop in Latin America, which influences prices.
"If import taxes are raised and global prices go up, then the import quantum could be different," said Veeresh Hiremath, a senior analyst with Hyderabad-based brokerage Karvy Comtrade.
India allows tax free imports of crude edible oils and charges a 7.5 percent tax on refined cooking oils.
A Mumbai-based trader said India's cooking oil imports would continue to have a bias for palm oils, which constitute almost four fifth of total imports.
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