Low duties, rising incomes push up veg oil consumption

Rises 5 per cent to 13.5 kg per capita from 12.86 kg last year.

Encouraged by low prices, India’s per capita vegetable oil consumption rose by five per cent to 13.5 kg per capita in the oil year November 2008-October 2009.

During the previous oil year, the per capita consumption was 12.86 kg, and during 2007-08, it was 11.4 kg.

Speaking at POTS-India, a seminar in New Delhi on Tuesday, Dorab Mistry, director of Godrej International, whose estimates are closely watched by the industry, forecast the country’s per capita vegetable oil consumption would continue to rise.

He said, “India is a typical price-elastic market, where lower prices encourage higher per capita consumption. In the oil year November 2008-October 2009, per capita consumption of vegetable oil rose sharply, thereby forcing India to import large quantity of sunflower oil and soyoil, which had hither to been neglected.”

Palm oil imports went up, too. The resourceful Indian refining industry discovered the joys of double fractionation and gave birth to super olein, he added.

In early 2008, the government responded to very high world prices by removing the import duty on crude unrefined vegetable oils and reducing the duty on refined oils to 7.5 percent. These rates continue, and the result was a dramatic fall in prices of edible oil.

Prices of RBD (refined bleached deodorized) olein in the wholesale market fell dramatically to Rs 42,000 a tonne in October 2008 from Rs 62,000 a tonne in March 2008. It further plunged to Rs 30,000 a tonne in November-December 2008. But, with a surge in imports to 8.6 million tonnes (MT) in 2008-09 as against 6.3 MT in the previous year, the price recovered.

Thanks to the strength of the rupee, despite a major rally in world prices, RBD olein is still available at Rs 38,000 a tonne today.

Considering the price fall, mass rural consumers have shifted from rupee-based purchase to weight-based buying, as the commodity has become more affordable to them, an analyst said.

The high price of pulses makes oilseeds like groundnut and soybean very attractive for direct human consumption. Therefore, per capita consumption is expected to rise by four to five per cent this year, on top of the jump registered last year. The economy continues to grow strongly, per capita incomes are rising and per capita consumption will rise, Mistry said.

Indian per capita income has now crossed the threshold of $1,000 and this is often regarded as the takeoff stage for consumption and growth. Besides, as prices of all food products are rising, the consumer will find vegetable oil quite affordable, he added.