By Sangeeta Tiwari
Palm oil is a form of edible vegetable oil obtained from the fruit of the oil palm tree. It is the second-most widely produced edible oil, after soybean oil.

However, it may have now surpassed soybean oil as the most widely produced vegetable oil in the world. The palm fruit is the source of both palm oil (extracted from palm fruit) and palm kernel oil (extracted from the fruit seeds).

Palm oil is one of the few vegetable oils relatively high in saturated fats (such as coconut oil) and thus semi-solid at room temperature. There are several commercial variants of palm oil available viz., Crude Palm oil, Crude Palmolein, RBD (Refined Bleached Deodorized) Palmoil, RBD Palmolien and Palm Kernel Oil. Crude Palm oil when subjected to refining results in the other factions.

Palm oil with an annual production of 25-27 million tons is second most produced oil in the world. Malaysia (13 million tons) and Indonesia (10 million tons) are the major producers. They together account for 85% of production.

Around 80% (21-23 million tons) of global production is exported. Malaysia and Indonesia with 12-12.5 and 6-7 million tons respectively are major exporters. India, China and EU are the major importers.

Price competitiveness has been reason for increased consumption of this oil. Bursa Malaysian Derivatives (BMD) is the largest futures market for crude palm oil. Malaysian & Indonesian FOB prices set the mood in the physical market.

India imports roughly 2.5-3.5 million tons of palm oil and its variants a year. The domestic production is very meager at 0.5 lakh tons. India imposes 65% duty on crude oil and 75% (imposed in 2003-04 Union Budget) on RBD Palm oil. The import ratio is highly dependent on the duty imposed.

In addition to the customs duty, Government of India also imposes tariff value, on which the customs duty is calculated irrespective of the actual price at which the oil is imported.

The edible vegetable oil prices depend on the various factors. One of the most important factor which influences the vegetable oil prices in India are the imports of vegetable oil. India is major importer of Palm and soy oil. The palm oil which hit the Indian shores is mainly from Malaysia and Indonesia.

India is one of the largest importer and consumer of edible oils in the World, imports nearly 3 million tons of palm oil annually (mainly from Malaysia, followed by Indonesia). This implies that the country is dependent on palm oil imports for over 25% of its annual edible requirement. There has been a sharp rise in the imports of palm oil into the country during the post 1998 period.

The Indian palm oil import basket has undergone a phenomenal change during the past 6 years. Crude oil has almost replaced refined oil imports owing to the differential duty between the two. The table below reflects the duty structure for various forms of palm oil imported into India.

Palm oil prices in India depend on the imported palm oil from Malaysia and Indonesia at the various ports. The prices in these countries are directly reflected in the trend of the palm oil prices at Indian ports.

Besides these palm oil trade in India is influenced by the supply-demand scene in the domestic market, including the factors influencing various oilseed production in the country, prices of various domestically produced and imported oils, production and trade policies of the Government- mainly the export-import policy, over-all health of the economy that has a bearing on the purchasing power of ultimate consumers, etc.

The entire industry of CPO in India is dominated by importers, large refiners, corporate involved in wholesale and retail trade through value-addition and retail-regional level players along with a few National level players. The industry is dominated by over 200 importing Companies, who are mostly refiners too.

Domestic oilseed and edible oil industry is organized in the form of Oilseed Crushers, Processors, Solvent Extractors, Technologists, Commodity-specific producers’ and traders’ Organizations/Associations, who influence the production and trade related policies of the Government in a way that is favorable to the respective community in specific and the over-all oilseed and edible oil industry.

This entry was posted on Monday, November 5th, 2007 at 12:34 pm and is filed under Food for Thought. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.