India's palm oil imports set to hit six-year low

India’s palm oil imports are likely to fall 15% in 2017/18 from the year before to their lowest in six years, hit by a hike in import taxes, a weaker rupee and tighter credit for would-be buyers, a senior industry official told Reuters.

Reduced purchases by the world’s top importer of the oil, where it is widely used to fry foods such as samosas or bhajis, could pile more pressure on benchmark international futures that are already trading near their lowest in three years.

“Local prices moved up due to higher import tax and depreciation in the rupee. The price rise moderated demand for imports,” said B V Mehta, executive director of the Solvent Extractors’ Association of India (SEA).

India in March raised its import tax on refined palm oil to 54% to support local farmers. That made palm cargoes less appealing than shipments of alternative edible oils such as soyoil, sunflower oil and canola oil - at least until import duties on those commodities were raised to 45% in June.

For more than three months palm lost its competitiveness in Indian markets relative to other oils due to the higher duty, said Sandeep Bajoria, chief executive of the Sunvin Group, a Mumbai-based vegetable oil importer.

India buys palm oil from Indonesia and Malaysia, with its soyoil mainly imported from Argentina and Brazil. It purchases sunflower oil from Ukraine.

In the first nine months of the 2017/18 marketing year that started on November 1, India’s palm oil imports fell 9.5% to 6.1 million tonnes, according to data compiled by SEA.

In the last three months of the year, imports could be around 1.8 million tonnes, with an average of 600,000 tonnes per month, Mehta said. Last year, India imported 2.55 million tonnes in the August to October period.

That would bring total 2017/18 palm imports to 7.9 million tonnes, down 15% on the year.

India now typically relies on imports for around 70% of its edible oil consumption, up from 44% in 2001/02.

Palm oil accounted for as much as 86% of India’s total edible oil imports a decade ago, but its share last year dropped to 62% and could fall to a record-low of 56% this year, according to SEA data.

Lower palm imports will drag down India’s total edible oil purchases this year by 6% to 14.2 million tonnes, Mehta said.

“Earlier, imports used to rise by 700,000 to 800,000 tonnes per year. This year, we are witnessing a drop of the same amount,” he said.