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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

16/02/2005

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

NEWS SOURCE

Business Lines - Ind

CATEGORY

HEADLINE

Effect of palm oil duty hike unlikely to be harsh
Mumbai , Feb. 15 - THE effect on consumer prices in view of thesimultaneous action of hike in duty together with reduction in tariffvalues on palm group of oils is unlikely to be harsh. Open market pricescould improve by a modest Rs 600 a tonne.

A hike in customs duty is expected to lend support to weakrapeseed/mustard prices and, possibly, save the Government fromundertaking massive price support operations.

With rapeseed/mustard crop harvest round the corner, forward prices forthe largest rabi oilseed crop have been considerably weak. Compared withthe minimum support price of Rs 1,700 a quintal, forward prices wereruling at about Rs 1,550 a quintal at the bourses and even lower at thecash markets.

Perhaps the most important effect of the latest move would be oninternational palm oil prices. After gaining around Malaysian ringgit(MYR) 70 a tonne to climb to nearly MYR 1,350 a tonne in the last few days(after Indian Government diluted carotenoid condition on February 4 and onreports of soyabean crop damage in Brazil late last week), crude palm oilfutures in Bursa Malaysia on Tuesday lost as much as MYR 25 a tonne to bequoted at MYR 1,309-1,310 a tonne at the close for March and Aprilcontracts.

Palm oil prices are expected to further shed the gains made in recent daysand move below the psychological MYR 1,300 a tonne over the next two tothree days this week as a response to the hike in duty here. The Indianannouncement came after the trading hours ended in Malaysia on Tuesday.

The Finance Ministry's decision is widely regarded as a brilliant one thatshould overall be in the interest of Indian oilseed growers and thedomestic processing industry. Merchant-importers have reason to be happybecause current tariff values will make refined palmolein imports moreviable than before.

However, refiners will have to tighten their belts and compete on merits.Their financial benefit arising out of dilution of carotenoid conditionstands eroded to an extent.