NEW DELHI, June 15 (Reuters) – India, the world’s largest importer of vegetable oil, will have to spend billions more this year to buy more expensive cooking oil from abroad and plans to cut taxes on those imports to lessen the blow to the economy, industry officials said.
The government plans to cut taxes on vegetable oil imports after cooking oil prices hit record highs last month as it seeks to make food costs more affordable for its population of over 1 , 3 billion inhabitants and to contain the pressure on prices.
WHY HAVE THE WORLD PRICES FOR EDIBLE OILS ALSO COMPETE?
Problems in key global oilseed production, coupled with the growing use of biodiesel, have fueled the global oil rally.
Soybean oil futures have jumped more than 70% this year after drought reduced soybean supplies to the United States and Brazil. The US Department of Agriculture has forecast global soybean stocks to drop to their lowest level in five years, at 87.9 million tonnes by September.
Prices for palm oil, the most widely consumed edible oil, also rose 18% in 2020 after COVID-19 closures slashed production from plantations in Southeast Asia.
Benchmark futures in Malaysia hit 4,142 ringgits ($ 1,007.30) per tonne in mid-March, their highest level since 2008.
Poor rapeseed and sunflower seed harvests in Europe and the Black Sea region further reduced supplies of edible oil, helping to push global food prices to 10-year highs last month.
Reflecting record global prices, national rates of palm oil and soybean oil have more than doubled in the past year.
WHY IS INDIA CONCERNED?
As the largest importer of edible oil, India spends an average of $ 8.5-10 billion a year on imported vegetables and the recent surge in prices will only further inflate its inflated import bill. Vegetable oil is India’s third largest import after crude oil and gold.
India’s vegetable oil imports have jumped to 15 million tonnes from 4 million just two decades ago, according to industry estimates. According to trade and industry experts, it could reach 20 million by 2030, spurred by a growing population with higher incomes and a taste for curry and high-calorie fried foods.
Domestic oilseed production has not kept pace with demand, as farmers prefer to grow grains such as rice and wheat, the price of which is guaranteed by the government.
India produced around 10.65 million tonnes of edible oils in 2019-2020, less than half of the roughly 24 million tonnes it consumed during that period, according to trade and industry estimates. government.
It imported the rest, purchasing about 7.2 million tonnes of palm oil from Indonesia and Malaysia, about 3.4 million tonnes of soybean oil from Brazil and Argentina, and 2.5 million from tons of sunflower oil, mainly from Russia and Ukraine.
WHAT WAS THE GOVERNMENT’S RESPONSE?
The surge in vegetable oil prices has hit people again already reeling from record fuel prices and declining incomes due to a devastating second wave of COVID-19 infections.
The government has expressed support for greater domestic production of oilseeds in recent years and was due to unveil incentives for farmers keen to increase oilseed production in its latest annual budget plan.
But the government has yet to come up with a viable plan to increase oilseed production.
India grows several oilseeds – mainly peanuts, soybeans and rapeseed (mustard) – but their prices are not guaranteed by the government like grain prices are. As a result, India’s production of rice and wheat is on average nearly six times the total production of oilseeds.
The local vegetable oil industry has argued that the government, which earns around 350 billion rupees ($ 4.79 billion) from taxes on edible oil imports, should set aside some to encourage farmers to turn to oilseeds.
But the government has taken no such action so far in 2021 and relies on adjusting import tax rates to try to control volumes and prices. ($ 1 = 4.11 ringgits)
Reporting by Mayank Bhardwaj and Rajendra Jadhav; additional reporting by Manoj Kumar in New Delhi and Fathin Ungku in Singapore; Editing by Gavin Maguire and Ana Nicolaci da Costa