Soyoil futures down on import duty withdrawal

Soya futures eroded 4 per cent on the local commodity bourses following the government’s decision to withdraw the 20 per cent import duty on crude soybean oil levied a few months ago.

Refined soya oil for delivery in June declined on Thursday by 4 per cent at Rs 441.30 per 10 kg on the Multi Commodity Exchange (MCX), while the contract slumped by 3 per cent to Rs 438.20 per 10 kg on the National Commodity & Derivatives Exchange (NCDEX). Contract for delivery in April slumped by 3 per cent each on MCX and NCDEX to Rs 442.50 per 10 kg and Rs 440.50 per 10 kg respectively.

“India has cut import duty to ‘nil’ on soyoil to keep the domestic price stable,” said the commerce secretary on Thursday. On November 18, the government had imposed 20 per cent import duty only on crude soybean oil, leaving the rest out of the duty net.

According to the Solvent Extractors’ Association (SEA), price of refined soybean oil, although it rose marginally by 2.3 per cent in the last one month, has nosedived by 33.22 per cent in the domestic market to Rs 44,500 a tonne. Solvent extracted soybean oil in Indore also recorded a slump of 31 per cent in one year but rose marginally by 4.30 per cent to Rs 41,200 a tonne on Wednesday.

India’s crude soybean oil (degummed) imports registered a rise of 63 per cent to 281,349 tonnes in the first four month of the oil year (November - October) as compared to 172,884 tonnes in the corresponding period last year.

Palm oil futures for delivery in June on the benchmark Malaysia Derivatives Exchange erased earlier gain of 2.1 per cent during the day to close at 1,905 ringgit per tonne.

The contract has slumped 43 per cent in one year due to falling demand on global economic recession.

“It is a surprising decision as the current local prices of all edible oils are nearly at the bottom level and are down by 30 to 50 per cent as compared to March 2008. This decision does not justify the reduction of import duty. Even inflation is down at all time low at 0.44 per cent,” said Ashok Sethia, president of the SEA.

The decision will not only discourage soybean farmers to migrate to other remunerative crops but also adversely impact the rapeseed/mustardseed crop, which is just hitting the market, said Rajesh Agrawal, coordinator and spokesperson of the Soybean Processors’ Association (SOPA).

Currently, rapeseed/mustard at Jaipur with 42 per cent oil content is quoted at Rs 2,100 per quintal. However, in reality, this year the oil content is lower at 38 to 39 per cent only and in process, the farmers is realising only Rs 1,800 to Rs 1,850 per quintal i.e., very near to the minimum support price (MSP) of Rs 1,830 per quintal. Sunflowerseed is also being quoted at Rs 1,900 to 2,000 per quintal, much below of MSP of Rs 2,215 per quintal.

“The reduction of duty of crude soybean oil will have serious repercussion on the price of domestic rapeseed/mustardseed and sunflower seed which has just been harvested and shall go down further. This will be detrimental to the interest of the farmers and they would be reluctant to sell their produce (oilseeds). This will lead to further reduction in the local processing of oilseeds and thereby increase import of vegetable oils in the coming months,” said Sethia.

This will lead to cheap edible oil imports resulting into the prices of other edible oils to cool down, said Davish Jain, chairman of the Central Organisation for Oil Industry (COOIT).

Dinesh Shahra, MD of India’s largest soya crushing company Ruchi Soya Industries Ltd is awaiting the government’s notification.