Blessing in disguise for edible oil refiners

Margins improve as import defaulters exit.

The edible oil industry has seen a growing number of import defaulters, but domestic refiners are not worried. Processing margins have in fact doubled to 4 per cent in the past one year with most fly-by-night operators exiting the industry.

Hundreds of small-time operators, who had entered the industry in the last couple of years, used to import crude edible oils in small lots to supply to domestic refiners hurting industry margins.

These operators made hay when prices were ruling high, but most of them have become insolvent now because of the dramatic fall in crude edible oil prices. .

According to an estimate, importers place orders three months in advance. But the price of crude palm oil has fallen a hefty 35-40 per cent in this period and these importers did not get a chance to either exit or execute a pact with domestic players, said Rajesh Agarwal, co-ordinator of Soybean Exporters Association (SOPA).

Most of these small operators have exited, helping the large players with a credible track record to get a much better margin, Dinesh Shahra, MD of Ruchi Soya Industries, the country’s largest soya crusher, said.

India meets about 45 per cent of its 12.5 million tonnes of edible oil demand through imports from Indonesia, Malaysia and Argentina. However, Malaysia has halted shipping crude edible oil while Indonesia and Argentina continue to supply crude edible oil which domestic mills refine and sell here.

Indonesia’s leading industry associations including GAPKI and Indonesian Palm Oil Association had blacklisted 30 Indian companies which defaulted on their import commitments. But, according to Siraj Choudhary, CEO (Refined Oils) of Cargill India, the number of defaulters could be in hundreds.

Atul Chaturvedi, president (agro) of Adani Enterprises, said India could be a hot destination for Indonesia which is sitting on a huge inventory.

India has over 15,000 oil mills, 600 solvent extraction units, 230 vanaspati plants and over 500 refineries, which together employ over a million people.

Globally, crude palm oil crashed 61 per cent in the last five months from $1205 per tonne to $465 per tonne while crude soybean oil slumped 45 per cent from $1,470 per tonne to $815 per tonne. Similarly, RBD palmolein and crude sunflower oil crashed 58 and 57 per cent respectively to $555 per tonne and $ 835 per tonne from $1,310 per tonne and $1920 per tonne respectively.