9/16/04 INDIA (Oilmandi) - India, the world's largest edible oil importer,on Wednesday announced sharp cuts in the base import price of palm oilsand crude soyoil to check rising inflation.
"We have taken some steps on edible oil. The tariff value of edible oilshas been adjusted. On an average there has been a reduction of about $50per metric tonne," Finance Minister P. Chidambaram told reporters.
"I am confident that it will get reflected in prices," Chidambaram saidafter a late evening meeting with Prime Minister Manmohan Singh.
India buys palm oils mainly from Malaysia and Indonesia and soybean oilfrom Argentina and Brazil. It imports nearly half of its annual edible oilneeds of more than 10 million tonnes.
The government cut the base import price of crude palm oil to $454 from$504, RBD palm oil to $489 a tonne from $543, others palm oil to $471 atonne from $523, crude palmolein to $479 a tonne from $532, RBD palmoleinto $497 a tonne from $552 and others palmolein to $488 a tonne from $542.
It also cut the base import price of crude soybean oil to $565 a tonnefrom $628.
A finance ministry official, who did not wish to be identified, earliertold reporters the move was part of the government's plan to curb domesticinflation.
Traders said the move would have a sobering effect on domestic prices andincrease the availability of cooking oil.
The net impact on domestic prices would depend on how the palm oil marketin Malaysia and the soybean oil trade in Argentina reacted to thedecision, they said.
"But as of today, there is a very remote possibility of Malaysiaincreasing its palm oil prices as there was not much demand for oils fromEurope, China or India," said Govindhbhai Patel, a leading groundnuttrader.
Malaysian crude palm oil futures rebounded from early losses to closehigher on Wednesday, helped by September 1-15 export data from cargosurveyor SGS and news that India will likely cut its base import prices.
The benchmark third-month November crude palm oil contract on the MalaysiaDerivatives Exchange ended up five ringgit, or 0.3 percent, at 1,461ringgit ($384.47) a tonne after trading as low as 1,432.
The finance ministry official said the government would lose revenue of6-7 billion rupees due to the cut. He ruled out any change in existingimport duties on edible oils.
India's wholesale price inflation has spiralled to a 3-½ year high of 8.33percent for the year to Aug. 28, pushed up by high global oil prices.
Traders were expecting a cut in base import prices of edible oils afterthe government slashed duties on petroleum products and steel to rein ininflation.
India fixes base prices to check the government's revenue losses due tounder-invoicing by some importers. Traders pay import duties on basevalues irrespective of the prices at which they purchase oils.
The last revision on palm oils was made last November. For crude soyoil,the base price was last changed in May 2004.
Traders say international prices of the oils were much lower than baseprices. They have been seeking a cut in base prices for months.