Falling Re likely to scuttle govt effort to cut oil tags

NO RESPITE FROM SPIRALLING PRICES

The rupee factor has led to a 6 per cent increase in the landed prices of crude palm oil (CPO) and has also caused an increase in domestic edible oil prices.

The depreciation of the rupee will partly offset the gains brought by the import duty cuts on edible oil.

The landed price of CPO between April 8 and May 8 rose by 1.28 per cent in dollar terms (from $1,170 to $1,185 a tonne). However, in rupee terms, the price rose by almost 6 per cent since the value of a dollar rose from Rs 40 to Rs 41.86 during the same period. This translates into a price increase of Rs 2.80 a kg.

Taking a cue from this increase, the domestic wholesale price of mustard oil increased by 4.67 per cent over the last one month to Rs 56,000 a tonne while refined soybean oil rose by 2.65 per cent to Rs 58,000 a tonne. Industry expects the price change to get reflected at the retail level in the coming days.

"The cost increase owing to weakening rupee will be reflected at the retail level over the next 8-10 days. A minimum increase of Rs 2-3 a kg looks certain in refined soybean oil, sunflower oil and vanaspati. There might be some sentimental impact on mustard oil as well," said Kishan Dhingra, managing director, JMD Oils.

To cushion domestic consumers against rising edible oil prices, the government reduced Customs duty on various edible oils by 20-55 per cent on March 20.

After inflation hit a 13-month high of 6.68 per cent for the week ended March 15, the Cabinet Committee on Prices (CCP) on March 31 decided to make imports of all varieties of crude edible oil duty free while cutting the import duties on all refined oil to a uniform level of 7.5 per cent. The country imports 45 per cent of its edible oil requirements.