Indian edible oil price under pressure due to Indonesian subsidy

KOLKATA, India, Oct. 17 (Xinhua) -- Massive stockpiles, coupled with Indonesian government's decision to slash export duty on crude palm oil, are likely to keep edible oil price in check in India.

With the import duty doubling to 1,022 U.S. dollars a tonne, the increase in the cost of import, however, was offset by a cut in export duty by Indonesia, which is main source of crude palm oil for India, and a decline in global prices.

Though the Indonesian government levies 100 percent more export duty on crude palm oil (CPO) than refined in order to protect domestic refineries, in a major relief for Indian importers, Indonesia has cut export duty on crude palm oil to 13.5 percent in September from 14 percent in the previous month and 18 percent in September last year.

"For the next couple of months, edible oil price may go up marginally due to the lean crushing season in the domestic market. But once soybean harvesting began in late September-early October season, the price would moved downwards," said Satyanarayan Agarwal, president of Central Organization for Oil Industry and Trade (COOIT).

Meanwhile, edible oil prices remained firm amid reports of crop damage in the U.S. due to drought and lower availability from domestic sources. In August-September, most edible oil price jumped between three and five percent.

"Market will move fairly in range-bound as the rationalization in export duty by Indonesia would have hardly any impact on Indian market," said Atul Chaturvedi, chief executive officer of Adani Wilmer Ltd, the company that produces Fortune brand edible oil.

The edible oil has posted two straight weeks of gains as the worst drought in over half a century damaged soybean crops in the U.S. Midwest, hurting soybean oil supply and shifting vegetable oil demand to the cheaper palm oil.

Indonesia, the world's largest palm oil producer, based export duty on average rates in Kuala Lumpur, Rotterdam and Jakarta. Palm oil on the Malaysia Derivatives Exchange, the global benchmark, has fallen 5.4 percent so far this year on a drastic decline in demand due to the sovereign debt crisis in Europe and slowdown in China. Enditem

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