POINTERS: India's Oils and Fats Import Mix in 2019

By: Mr. Govindbhai G. Patel

a) He is Managing Partner of GG Patel & Nikhil Research Company. A first of its kind research company in India which is working on primary research about agricultural industry and its dynamics. The company has undertaken several projects & provides detailed statistics and information with its core competence in oils & oilseeds market.

b) He is Managing Partner of GGN International, an intermediary which helps Indian importers procure imported oils like CPO, Palmolein, Soybean Oil, Sunflower oil, Rapeseed oil etc.

c) He has spent more than 50 years in the oilseeds Industry, with experience on all aspects of the veg oil Industry. He has experience of running crush plant, solvent plant, and refinery to Vanaspati Industry. He has actively participated in Import of Vegoils & export of oil meals and oilseeds to Europe & South east Asia.

d) Ex - President of The Solvent Extractors’ Association of India, Mumbai (SEA) which is a Premier Association of Oils, Oilseeds and De-oiled Meals industry in India having more than 850 membership.

e) Ex - President of The Central Organization for Oil Industry & Trade, New Delhi (COOIT) – COOIT is an apex body for all the Associations situated in India relating to Edible Oils, Oilseeds and Deoiled Meals.

f) Ex - Vice-Chairman of the Vanaspati Manufacturers’ Association of India, New Delhi.

g) Have presented various Papers at International and National Forums.

h) Leader of various delegations sent broad sponsored by Central Government and various Associations for promotion of Oilseeds, Oils and Deoiled Meals export/import and trade in general from India.

i) Presently Executive Committee Member of SEA and COOIT and also Convener of Crop Estimate Committee of COOIT and SEA.

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1. India is the 2nd largest most populous Nation, Largest democracy country with maximum young people, One of the fastest growing economy.

2. India is the largest importer of edible oils in the world. India imported 4.43 ml T of edible oils during 2001-02 and it had increased to 14.51 ml T during 2017-18. Over and above this, India imported 0.51 ml T Non-Edible Oils during 2017-18. The growth of import of edible grade Palm Oil during this period was 195% while growth in import of Soft Oils was 210%.

3. Import of Non-edible Palm Oil was 263k during 2001-02 which increased to 510k during 2017-18.

4. Consumption of Palm Oil during 2001-02 was 29.08% of all the edible oils consumed in India and it increased to 39.3% during 2017-18.

5. Demand Drivers of edible oils in India are :
a. Consistent GDP growth.
b. A big expansion in the Indian Middle class of people.
c. Double digit growth of Out of Home consumption of edible oils.
d. Per Capita consumption of edible oils in 2001-02 was 9.4 kg and it increased to 16.3 kg in 2016-17 and likely to increase to 16.8 kg in 2017-18. Still Per Capita consumption is below the threshold level of consumption. Low consuming States of Central and East India will catch up with their peers of West and North India.
e. Even with a Moderate Population growth, absolute increase in number of
people is quite high.
f. Schemes like NREGA and rising the income level of people who are consuming
much below all India level.
g. Rising urban population and many more.

6. Different Zones have different preference of edible oils :
a. Mustard Oil is Kachchi Ghani Oil with a strong pungent smell. The biggest
markets for this oil are East India followed by North India.
b. Cottonseed Oil have a largest consumption in Gujarat and Surrounding
States.
c. Sunflower Oil is preferred by affluent class of people of South and West
India.
d. Refined Soybean Oil is preferred by consumers in Madhya Pradesh,
Maharashtra and North India.
e. Palm Oil is highest selling oil in the country. This is gaining big
popularity in the Out of Home Consumption (HORECA) segment. This is the
preferred oil in South India and Coastal East India. It is gaining
popularity in West and North India also.
f. Groundnut oil, once upon a time, the most preferred oil but now slowly
dying out due to high price and low availability. The demand of Groundnut
Kernel is phenomenally growing. Hence creating a scanty of availability
of Seed for crushing.

7. There is seasonal pattern of Palm Oil consumption. During Summer period,
consumption is the highest i.e. from March to June. At higher temperature,
during these months Palm Oil does not become hazy. During Monsoon, demand is
reasonably high i.e. during July to October. During Winter, consumption is
low i.e. during Nov to Feb. As the temperature are low, Palm Oil becomes
hazy while the people prefer Oil in liquid form.

8. Out of Home Consumption (OHC) is increasing every year due to :
a. Tremendous growth in Fast Food Industry.
b. More than 80% of Urban Indians eat out several times in a month.
c. Families order Food from Outside.
d. Visitors visiting Malls end up visiting Food Court.

9. Production of Domestic Oils increased from 5.64 ml T in 2001-02 to 7.76 ml T
during 2017-18 while the consumption increased from 10.12 ml T in 2001-02 to
22.25 ml T in 2017-18. The domestic production is not catching up with the
consumption and hence there is every year increase in import of edible oils.
Dependency on import during 2001-02 was 44% which has increased to 65% in
2017-18.

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Questions & Answers (5) :

Norhanis Jamaludin

5 years ago

Hi Mr.Govindbhai, How the differentiated products place themselves in the India food supply chain. Does the duty imposed positively impacted the importing countries or it actually increasing the supports and interests of the local producers instead?

Govindbhai Patel:
The higher duty impose encourages the farmer to grow more oilseeds instead of other competing crops as India is deficit in edible oils.
5 years ago

Azwan Fitri Bin Zainal Abidin

5 years ago

Hi Sir, Based on the consumption pattern provided in your presentation, at one glance we may conclude that Palm Oil has had dominant it presence once it introduce to India. the question is, how this pattern of consumption will influence the policy makers towards the import tax tariff on the Palm Oil in general (both includes crude and refined)? TQ

Govindbhai Patel:
The policy makers don’t take decision on the basis of pattern of consumption of different oils. Whichever oil is comparatively cheaper, its consumption will increase.
5 years ago

George Teh

5 years ago

Can you provide insights on how Indian policy makers justify escalating import duties on edible oil? The statistics you cited drives one to conclude that that import duties are merely a tool to generate fiscal revenue for the government as there is no discernible trend that the duties contributed to uplifting domestic production nor curtailing domestic consumption.

Govindbhai Patel:
The import duty on edible oils are increased by the Government of India so that the prices of domestic oils increases and the farmers get better prices for their domestic oilseeds production and are encouraged to grow more oilseeds. It is not a tool to generate fiscal revenue.
5 years ago

George Teh:
Thank you for sharing the insights. The available data prima facie suggests that import duties policy has limited success in encouraging higher oilseeds production. This leads one to the curious speculation if the root cause of low and inequitable income share of oilseeds farmers in fact lies in problems within the value chain. Do you agree and any further insights would be much appreciated.
5 years ago

Govindbhai Patel:
The oilseeds production in India is not increasing to desired levels, on spite of government efforts, as 75% of the oilseeds are grown on area which do not have the irrigation facilities, hence the production of oilseeds depend on vagaries of monsoon.
5 years ago

Shaheen

5 years ago

Your forecast shows that that India import preference has changed to favour imports of RBD palm olein to CPO for 2018/19 from 2017/18? How do you explain the change? India has make steep changes to its import duty and it is quite frequent last year How is the ground situation like? Is the default level high? Is your edible oil community and government comfortable with this type of policy measures? How does India importers and buyers handle this type of situation?

Govindbhai Patel:
Previously the duty difference between CPO and RBD Olein import was 10% which has been brought down recently to 5%. This will encourage more import of RBD Olein and less import of CPO. There are no default in the Trade. The refining industry is not satisfied due to recent reduction in difference between import duty on CPO and RBD Olein and has represented to the Government to increase the difference to 10% as it was prevailing previously.
5 years ago

shekhar agrawal

5 years ago

pls outlook for 2019 cpo & target.....

Govindbhai Patel:
Outlook for 2018-19 (Nov-Oct) is given in Slide No. 15.
5 years ago