Prices of Edible Oil in India Soars, Imports Plummet to the Lowest in Six Years

RBD Palm Oil

Published Apr 9, 2021

Imports of vegetable oils from India, the largest importer in the world, have sunk with increased import taxes as well as prices within the global market.

As the largest importer of vegetable oils in the world, in which 40% of its total agricultural imports constitute oils alone, palm oil is the leading oil import in India with an estimated 62% share(DowntoEarth, 2019). But in light of global massive price hikes in edible oils including palm, soybean, and sunflower, imports of edible oils from India have sunk to their lowest in six years.

Vegetable Oil Imports Sees Hurdles

From December 2020 to February 2021, India surged in imports of palm oil when India had decreased import taxes for the oil to the initial amount of 37.5% to 27.5%. This act, however, was temporary, with anticipated negative impacts on domestic farmers, the Indian government imposed higher import taxes for crude palm oil imports, in which the final tax amount 37.25%, an increase from the previous amount of 30.25%.

As India had already imported much of its largest consuming edible oil segment, palm, exports for 2021 are expected to shrink, especially on the backdrop of soaring edible oil prices. Vegetable oil price indices have been on a rapidly increasing trend, in which according to the FAO vegetable oil price index, prices have increased by a 51% YOY in February 2020 against 2021 (Chart 1).

Chart 1. Vegetable oil price index.

Source: FAO

For palm, supplies have been running low from top exporting countries such as Malaysia, which has faced a double whammy of labor shortages as well as unfavorable weather conditions. Additionally, inventories for other vegetable oils such as soy and sunflower witnessed a drop within the global market. In recent data from the Solvent Extractor’s Association (SEA) of India, local rates of imported oil for RBD palm olein as of April 1st jumped up by 59.94% compared to last year’s average and increased by 2.53% compared to the previous month. Crude Palm Oil (CPO) prices have shown similar trends, increasing by 78.39% from last year’s average, and growing by 4.07% compared to the previous month. According to Tridge’s Indonesia Engagement Manager, Lena Hartanto, the rally in global CPO prices was also supported by price hikes in its substitute commodity-soybeans. Currently, there has been a delay in major producing countries such as Brazil, Argentina, and the US, from the effects of La Nina, further causing a strengthening of prices.

The forthcoming of Biden, and consequently the added pressure for green energy policies have not helped cool down global edible oil prices. With more demand for edible oils into the biodiesel sector in replacement of fossil fuels, prices for edible oils have been remaining strong.

India Curbs Imports

Feeling the pressure of higher prices, India has curbed its imports. Imports of vegetable oils in February 2021 were 838.6K tons, a YOY decrease of 32.6%. Current imports of vegetable oils in India stand to favor CPO as refined oils have been put under a restricted list as of January 2021. Due to reduced global production volume, sunflower oils have also been deemed too expensive to import.

High prices of edible oils are expected to continue. Indonesia, a major producer, and exporter of palm oil are expected to increase its reference price to USD 1,093.83 per ton, increasing the export tax to USD 116 per ton (export levy remaining the same) in order to support its domestic biodiesel program. Demand for palm oil has also increased from China, as economic recovery is in sight, and from the Middle East as well, with the upcoming Ramadan season.

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