Global price rise nullifies duty cut on edible oils

With global exporters raising prices of crude palm oil and soya oil by as much as $30 a tonne, the government's recent decision to cut import duty on edible oil to make it cheaper is unlikely to have its desired impact.

Crude palm oil (CPO) prices in the country have surged to $835 a tonne from $805 on July 23, when the duty cut was announced. Similarly, soya oil prices also moved up to $888 from $880.

"International prices of crude palm oil have gone up by $25 a tonne from July 23 level, when the duties were cut," Solvent Extractors Association Executive Director B V Mehta said. He attributed the duty cut by Indian government as one of the reason for rise in global edible oil prices.

The local edible oil importers feel exporters in Malaysia and Indonesia are likely to jack up prices further as demand in the country will surge because of the festival season ahead.

The August CPO contract at Bursa Malaysia Derivatives is likely to go up to $825.62 a tonne within the next fortnight from the current level of $788.89, an importer said.

The government last week cut the import duty on edible oils by 5-10 per cent, bringing down duty on crude palm oil to 45 per cent and crude soyabean at 40 per cent.

India, the world's largest edible oil importer, buys around three million tonnes of crude palm oil, mainly from Malaysia and Indonesia. It imports soya oil from Argentina and Brazil.

Apart from demand from India, China and West Asia, the bullish market sentiment in palm oil is also linked to higher soyabean prices and weaker ringgit against the US dollar.

Malaysian exporters hope the market would remain bullish for at least the next month with demand likely to outstrip supply.