Nov. 4 (Bloomberg) -- India, the biggest palm oil buyer, needs to impose a duty on imports to protect oilseed growers from cheaper overseas supplies as a surge in inventories in Southeast Asia lowers prices.
India should levy a tax of 10 percent on crude palm oil, Dorab Mistry, director at Godrej International Ltd., said in New Delhi today. Palm oil comprises almost 80 percent of India’s cooking-oil imports.
Palm oil, used in everything from biofuels to candy to noodles, has fallen 21 percent this year as inventories surge in Indonesia and Malaysia, which account for 87 percent of world supply, and a global economic slowdown curbs demand. The plunge may cut revenues for producers including Sime Darby Bhd. and IOI Corp. and cap increases in food costs.
“The government should impose a duty on imports of crude palm oil to protect farmers and use the money in long-term development of oilseed cultivation,” said Davish Jain, managing director of Prestige Group of Industries, one of India’s biggest processors of soybean and exporters of soybean meal. “Unbridled imports would be counter-productive for the growth of indigenous oilseed production.”
Palm oil for January delivery dropped 1.6 percent to 2,496 ringgit ($817) a metric ton on the Malaysia Derivatives Exchange in Kuala Lumpur on Nov. 2. Inventories jumped to an all-time high of 2.48 million tons in September, while output gained to 2 million tons, according to the Malaysian Palm Oil Board.
Cooking-oil imports by India, the second-largest buyer, are set to surpass 10 million tons for the first time after dry weather damaged India’s oilseed crops and as demand climbs, GG Patel & Nikhil Research Co. Managing Partner Govindlal G. Patel said in September. Purchases may gain 5.4 percent to 10.3 million tons in the year ending Oct. 31 from about 9.78 million tons a year earlier, said Patel, who’s traded cooking oils for more than three decades.
Mistry outlined what he described as an optimistic scenario for an importing nation in 2013.
Indonesia and Malaysia will have record stockpiles of palm oil at the beginning of next year, while production of soybeans will climb in the first quarter of 2013 in South America along with excellent harvests of sunflower in Argentina and mustard in India, said Mistry, who has traded palm oil for 35 years. This may be followed by a switch in some plantings from corn to soybeans in the U.S., he said.
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