18/03/2008 (The Hindu Business Line) - The Centre has banned exports of all edible oils from the country as a measure to curb their rising prices and check inflation. In a notification issued late on Monday, the Directorate-General of Foreign Trade, an arm of the Commerce Ministry, said the ban, with immediate effect, would be applicable for one year.
The Centre was expected to come up with various measures to check rising prices, especially in the case of edible oils after inflation for the weeks ended February 23 and March 1 crossed five per cent.
Prices of cooking oils witnessed sharp rise during the early part of this month in tune with the global trend, where the rates zoomed to record highs.
Also, the Union Government was expected to cut Customs duty on edible oils import in the Budget to cool down rising prices.
Edible oil prices have been virtually on the boil since last year on higher crude prices, diversion of vegetable oil for production of bio-diesel. The domestic market, despite measures taken by the Centre to temper the rise in prices, gained on lower rabi crop prospects and rising demand.
However, with the global equities crashing on fears over credit squeeze, the vegetable oils market has also been witnessing a decline. During the last two trading sessions, the soyabean counter on Chicago Board of Trade and crude palm oil on Malaysia Derivatives Exchange have hit lower ceilings.
The Centre’s move to ban exports has disappointed the industry. “There was no need for a ban on export of edible oils from the country. In our view, these premium exports could have been substituted by higher volume imports of cheaper oils,” said Mr Davish Jain, Chairman of the Central Organisation for Oil Industry and Trade.
In his view, export of groundnut oil fetches a premium and it could have been allowed. In turn, the Centre could have imported either crude palm oil or degummed soyabean oil that could be 1.3 to 1.4 times the volume of exported oils.
“In fact, we had made such a request to the Centre, saying premium exports should not be stopped,” Mr Jain said.
According to Mr B.V. Mehta, Executive Director, Solvent Extractors Association of India, groundnut oil exports were fetching about $1,750 a tonne on an average. “So far, we could have exported 20,000 tonnes and another 5,000 tonnes could have been contracted,” he said.
Besides, groundnut oil, which is shipped to China, the US and Europe, other oils being exported are rapeseed and mustard oil and packaged coconut oil.
While groundnut oil was fetching $1,750 a tonne, import of crude palm oil costs $1,215 c&f and de-gummed soyabean oil $1,465.
“The quantity of edible oils exported from the country is hardly 40,000 tonnes, whereas imports are nothing less than 51 lakh tonnes. We don’t think exports would have any effect on the prices,” Mr Mehta said.
Mr Jain said the upheaval in the equities market had begun to affect the vegetable oils market and prices had begun reacting fast. “The downside in the vegetable oil is much bigger and prices are currently below the pre-budget levels,” he said.
In Mumbai, on spot and futures market of oilseed and oil, groundnut ready oil declined Rs 5 to Rs 720 for 10 kg, while RBD palmolein slipped Rs 7 to Rs 595.
Refined soyabean oil dropped by Rs 15 to Rs 650 for 10 kg and sunflower oil slipped Rs 20 to Rs 770.
On MCX, refined soya oil for April delivery declined 2.24 per cent to Rs 642.60 for 10 kg.
On NCDEX, soyabean oil for March delivery fell from Rs 659 to Rs 644.95 for 10 kg. March contracts on NCDEX for groundnut oil slipped to Rs 728.15 (Rs 731); RBD palmolein to Rs 627.45 (Rs 644) and rapeseed/mustard to oil Rs 625.55 (Rs 631).
The fall is being attributed more to the decline in global trend than the ban.
According to analysts, the ban could affect sentiments to a certain extent and Tuesday’s trend was, possibly, in line with that.