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Vinod Mathew

AHMEDABAD, Jan. 2

THE stand-off between the Saurashtra-based edible oil industry and the Gujarat Government showed no signs of resolution but trading of groundnut oil began on a tentative note on Wednesday with the spot prices hovering around Rs 485 per 10 kg.

Also, the oil crushing mills of Gondal and Junagadh quietly began operations after remaining closed for almost a week following the relentless raids carried out on its premises by various Government departments such as health, power, pollution and sales tax.

There are some 150 oil mills in and around Saurashtra of which over 100 are operational. Of this some 50 are in Gondal, 35 in Jamnagar, 25 in Amreli and 20 in Junagadh. Between they produce around 1,000 tonnes of oil per day, the average capacity of each mill being 10 tonnes per day.

However, the impasse is far from over as the groundnut oil trade, led by the Saurashtra Oil Millers Association (SOMA), has pressed for a meeting with the Chief Minister, Mr Narendra Modi. It is expected that the oil trade representatives will get to meet Mr Modi on Monday and request the Government not to determine groundnut oil prices on behalf of the market driven economy.

While the oil trade is in no mood to concede any ground, it has decidedly been pushed on the backfoot by the series of raids conducted by the State Government soon after the new Government came to power. Also, the current price of Rs 485/10 kg was indicative of a downward movement in groundnut oil as against the upward spiral that it had hit in the last few weeks.

The traders in Rajkot are now convinced that the groundnut oil prices will fall to around Rs 460 by January 15. Also, the fact that cottonseed oil, at Rs 386/10 kg, reflects a Rs 100 variation is being viewed as artificial by the industry. In normal times, this difference is not more than Rs 40 or so, they point out.

``The Government action was triggered by a few oil millers who began buying at around Rs 500-510 per 10 kg which was way above the ruling prices at that time. Though they cornered only a few tankers (10 tonnes), this was enough to disturb the market and force the hand of the State Government. Now, with the Malaysian oil prices also remaining depressed these oil millers will have a hard time infusing bullishness into the groundnut oil prices,'' Mr Ramesh Patel, a leading edible oil broker, told Business Line.

The oil millers are pointing at a drought induced low groundnut production for the year at around 12 lakh tonnes as the main reason for the price increase.

On the other hand, diminished production has been a bogey that has been raised time and again by the oil millers, say the Government officials. Clearly, price reduction in edible oil would leave a lasting impact on the consumers and the newly elected Government hopes to score big with the electorate on this count.

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