The Hindu Business Line : Edible oils surge on tight supply

EDIBLE oil prices in the country have increased by over five per cent since the beginning of the week on tight supply. This, in turn, has led to surge in global palm oil prices.

"There is tightness in the physical market. With imports being scarce or minimum due to a higher tariff rate, the effects are showing on the spot market here," trade sources said.

According to reports from Kuala Lumpur, an international trading firm has been instrumental in pushing up palm oil prices, citing higher Indian edible oil prices.

As a result, July futures for crude palm oil were quoted at $413 a tonne, up $22 a tonne since the beginning of the week.

"Fire in the Indonesian province of Sumatra has also been a factor behind the rise this week," an analyst said.

According to trading sources, with the depression over China cancelling or postponing its purchases behind it, the trade was recovering from the hammering it received during the last two weeks.

"The reasons for higher price here are different. With the tariff rates being at least $90 over the actual c.i.f price of imported edible oil, rates are higher here. Two, the dollar has been rising against the rupee during the last few sessions, causing another flare-up," the sources said.

The tariff rate is the basic price fixed for import of edible oil by the Government. This serves as a benchmark for the customs to levy duty on the imports. For example, customs authorities levy 65 per cent duty on crude palm oil imports for which the tariff rate is $502.

Though the Government reduced the tariff rate for soyabean oil last month, it is yet to revise the rate for the palm group of oils.

"The trade has been expecting the Government to cut the tariff rate to the prevailing global rates. Due to this, few traders have ventured to import palm oil," the sources said. "This has led to the drying up of supply," they said.

However, the price increase has not been confined to palm oil alone. Groundnut, sunflower and even industrial oils have witnessed sharp rise in prices since the beginning of the week.

RBD palmolein prices were quoted at Rs 402 for 10 kg on Wednesday against Rs 388 during the weekend. Groundnut in loose was quoted at Rs 452 (Rs 413 during the weekend) for 10 kg. Refined soyabean oil was up at Rs 428 for 10 kg (Rs 412), while sunflower and refined sunflower oil increased to Rs 435 (Rs 413) and Rs 485 (Rs 464) for 10 kg respectively.

During the period, castor oil has increased to Rs 379 (Rs 372) for 10 kg and cottonseed oil to Rs 449 (Rs 430).