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 Price A Major Factor In Determining Palm Oil Demand In India

30/08/2007 (Bernama), Kuala Lumpur - Pricing will be one of the major factors in determining the share that Malaysian palm oil can command in India's lucrative edible oils market, according to an Indian vegetable oils industry official.

B.V. Mehta, executive director of the Solvent Extractors' Association of India, said the landed price of soybean oil imports into India was about US$90 higher than palm oil at the moment.

"But if that goes down to US$60, then soybean oil will be the preferred choice," he told Bernama in an interview on the sidelines of the International Palm Oil Congress 2007.

India is expected to import 4.75 million tonnes of edible oils in the November 2006 to October 2007 period, up from 4.417 million tonnes for the same period previously, Mehta said.

Palm oil is expected to command 66 percent of the total imports for the 2006-2007 period, while the rest will be soft oils, he said.

The share of palm oil in the last seven years has fluctuated from a high of 78 percent in the 2003-2004 period to a low of 58 percent in the 2005-2006 period, Mehta said.

He said the share for palm oil would have been higher had prices been in the range of US$400 of US$500 per tonne compared to over US$700 now.

According to Mehta, price does matter in influencing consumption as high price will affect the demand from the lower segments of society.

He noted that per capita consumption in India is still low at 11 to 11.5 kilograms with the top 10 of the population consuming 20 kilograms per capita and bottom 30 consuming less than five kilograms per capita.

Per capita consumption is bound to go up as the middle class has more money with the economy expected to grow about 10 percent over the next five years, he said.

Mehta said India's demand for edible oils is expected to increase from 12 million tonnes last year to 15.6 million tonnes in 2010 and 21.3 million tonnes in 2015, a growth of five to six percent annually.

Domestic production is likely to rise by 300,000 tonnes per year, and an additional 250,000 to 300,000 tonnes annually will be imported, barring an exceptionally good year for the crop in India, he said.

India imports palm oil mainly from Indonesia and Malaysia, and soybean from Argentina and Brazil while its own oil seeds averaged 25 million tonnes annually.

Mehta said India also encouraged the cultivation of oil palm and has identified about 800,000 hectares in southern India in areas such as Tamil Nadu, Karnataka and Goa, but only 80,000 hectares planted so far.

He said a major problem was the lack of investment in the industry as oil palm was not declared a plantation crop, which meant that the land used for cultivation would continue to belong to the farmers.

"If a farmer decides he doesn't want oil palm planted on the land tomorrow, he can take back his land," he said, pointing to the problem in attracting major investments to oil palm plantations.

Secondly, climate conditions are also not favourable as India does not get rain throughout the year, Mehta said, adding that the rainy season are July, August and September whereas oil palm needed a lot of water year round.

Mehta said the Indian government realised the potential of oil palm in boosting edible oil production as it could produce 10 times more edible oil than other oil seeds.

Groundnuts could produce only 400 kilograms of oil per hectare but oil palm could produce four tonnes per hectare, he said.

Mehta said the challenge for India was to boost the productivity of its land as there was no more land for expansion.

"Horizontal expansion is not possible," he said, adding that the only choice was vertical growth.

He said if the oil seeds production could be raised by 100 kilograms per hectare, it would translate into an additional 2.6 million tonnes.

He also said that there was a need to boost local production of oil seeds as the import bills of edible oils was expected to rise to US$3 billion this year from US$2 billion last year, and US$4 billion next year.


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