During the first six months of the current oil year, India experienced a significant increase of approximately 22.29% in imports of edible oils. India imported 80.02 lakh metric tons (LT) of edible oil from November to April, up from 65.43 LT in the same period last year.
IBT conducted an analysis to uncover the driving factors behind this surge in imports and assess its impact on India’s domestic edible oil industry.
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India imports approximately 56% of its total annual edible oil consumption, which amounts to around 25 million metric tons (MT). The annual imports of edible oil stand at around 13 MT, with palm oil (8 MT), soybean oil (2.7 MT), and sunflower oil (2 MT) being the primary imports. Palm oil is predominantly imported from Malaysia and Indonesia, while soybean and sunflower oils are mainly sourced from Argentina and Ukraine. The share of domestic edible oil includes mustard (40%), soybean (24%), groundnut (7%), and others.
During the first six months of the oil year 2022-23 (November–October), India witnessed a notable 22.29% increase in the imports of edible oils. The rise was driven by a significant increase in inbound shipments of palm oil and sunflower oil during this period. Data from the Solvent Extractors’ Association of India (SEA) reveals that the country imported 80.02 lakh tonnes (LT) of edible oil from November to April, compared to 65.43 LT in the corresponding period of the previous year.
What drove the surge?
Imports of palm products, including crude palm oil and RBD palm oil, rose to 49.09 LT from November to April of the oil year 2022-23, marking a substantial increase from 30.92 LT in the same period of the previous year. Consequently, the share of palm oil in the total edible oils increased to 61% in the first six months of 2022-23, up from 49% a year ago.
RBD palm oil imports, which refer to refined, bleached, and deodorized palm oil, reached 11.10 LT, compared to 9.20 LT in the previous period, while crude palm oil imports amounted to 37.61 LT. The excessive import of RBD palm oil has resulted in low capacity utilization in India’s palm oil refining industry.
In the first half of the current oil year, sunflower oil imports experienced a robust growth rate of 23.12%, with a significant increase observed in April. This rise can be attributed to an oversupply of sunflower oil in the market and lower international prices compared to soybean oil and CPO (Crude Palm Oil).
However, in May, imports reached their lowest point since February 2021, as palm oil was traded at a premium to soy and sunflower oil. Nevertheless, lower imports and price corrections in June encouraged Indian buyers to increase their purchases, according to Sandeep Bajoria, CEO of Sunvin Group.
Unravelling Price Dynamics and Market Impact
The cost, insurance, and freight (CIF) import price of crude sunflower oil in April was US$ 1,036 per tonne, compared to US$ 1,108 in March. Similarly, the CIF import price of crude soybean oil and crude palm oil (CPO) stood at US$ 1,049 per tonne and US$ 1,039 per tonne, respectively.
Looking ahead, the landed prices of palm oil at the Mumbai port, which holds a substantial 60% share in India’s import basket, have witnessed a significant decline. On May 19, 2023, the landed price of palm oil reached US$ 925 per tonne, marking a 50% decrease compared to US$ 1,840 per tonne recorded a year ago. Landed prices of crude soybean oil and sunflower oil have also experienced declines, reaching $990 per tonne and $950 per tonne, representing 47% and 56% reductions, respectively.
Several factors, including weather forecasts, the policies of the Malaysian, Indonesian and Indian governments, Chinese demand, and the situation in Ukraine, will play a crucial role in determining future prices. These factors, along with broader considerations such as macroeconomic fears and geopolitical issues, will significantly impact edible oil prices.
Government Policies and Industry Concerns
Industry stakeholders in India have proposed increasing the duty differential between crude and refined oil to limit the high volume of refined palm oil imports. However, the government is unlikely to raise import duties on edible oils, despite the sharp decline in domestic cooking oil prices.
SEA has advocated for higher import tariffs due to the falling prices of mustard oil, which holds the largest share in India’s consumption basket. Nevertheless, the government has decided to keep import tariffs unchanged. In September 2022, the government reduced import duties on crude palm, soybean, and sunflower oils, and in December 2022, it extended concessional duties on edible oils until March 31, 2024. Ajay Jhunjhunwala, President of SEA, expressed concerns about the uncontrolled import of palm oil, which has led to a collapse in edible oil prices, impacting the marketing of mustard during peak harvest time, and causing distress to farmers.
India’s growing import of edible oils, particularly palm oil and sunflower oil, highlights the significance of monitoring global market dynamics and domestic policies. With imports accounting for around 56% of total annual consumption, maintaining a delicate balance between imports and domestic production becomes crucial. However, the excessive import of refined palm oil has led to the underutilization of capacity in the palm oil refining industry.
The declining landed prices of palm oil, soybean oil, and sunflower oil pose challenges and opportunities for India’s edible oil industry. Farmers face reduced income, and low refining capacity hampers efficiency. Market volatility and import dependence add risks.
However, consumers benefit from affordability, stimulating demand and export potential. Efficient operations and policy interventions can ensure stability while supporting farmer and consumer welfare. Investing in research and development for domestic oilseed cultivation enhances self-sufficiency. Striking the right balance between imports and domestic production is essential to strengthen the industry and secure India’s food security and economic stability.
