Bloomberg News

India to Cut Cooking Oil Imports by Boosting Local Supplies

October 13, 2011

(Updates with comment from analyst in fourth paragraph.)

Oct. 13 (Bloomberg) -- India, the world’s biggest buyer of palm oil and lentils, plans to provide financial incentives to farmers to boost domestic production and pare reliance on imports in the next five years, Farm Minister Sharad Pawar said.

“On pulses and oilseeds, I want that India should not depend on any country,” Pawar said in an interview in New Delhi yesterday. “I am not saying that we will become an exporter, at least we will be self-sufficient in four to five years.”

Reduced purchases by India may weigh on palm oil prices, which more than doubled in the three years through 2010, and help cool inflation that’s the fastest in a more than a year. Cash incentives to boost palm oil output may also benefit producers Ruchi Soya Industries Ltd. and Godrej Agrovet Ltd., a unit of Godrej Industries Ltd.

“We will definitely see some pressure on global prices of edible oils, particularly on palm oil, if India becomes self- reliant,” Prasoon Mathur, a senior analyst at Religare Commodities Ltd. said by phone from New Delhi. “Past experience shows that it is a remote possibility.”

India plans to develop oil palm as a major crop in the north-eastern states as the region’s weather is suitable for its plantation, Pawar said. The farm ministry may focus on developing the central region as the hub for soybean cultivation, while north India will be developed as an area for growing mustard, he said. Peanut cultivation will be promoted among the south Indian states, he said.

“It is possible for the country to become self-sufficient in edible oils,” Pawar said. The government may soon announce incentives for oilseed growers, he said.

High-yielding Seeds

The government should focus on developing high-yielding varieties of oilseeds and making them available to farmers at affordable prices, Religare’s Mathur said. A sharp increase in oilseed prices “is not possible as it will lead to higher inflation,” he said.

India meets more than 50 percent of its annual cooking oil needs through imports. It buys palm oil from Indonesia and Malaysia, the biggest producers, and soybean oil from Argentina and Brazil.

Overseas purchases of vegetable oils may climb as much as 12 percent to 9.2 million metric tons in the year beginning Nov. 1 from an estimated 8.2 million tons this year, Sushil Goenka, president of the Solvent Extractors’ Association of India, said Sept. 20. The country imported 6.86 million tons of vegetable oils in 10 months through Aug. 31, according to the group.

Palm oil futures for December delivery dropped as much 1 percent to 2,835 ringgit ($903) a ton. Prices have fallen 25 percent this year on prospects for rising supplies from Indonesia and Malaysia.

--Editors: Thomas Kutty Abraham, Abhay Singh

To contact the reporter on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net

To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net; James Poole at jpoole4@bloomberg.net


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