India’s stock limits on edible oils may not slow palm oil imports: trade sources

India’s recent limits on edible oil stocks are not expected to slow palm oil imports in the near term, but harsher restrictions could backfire on the domestic supply chain at a time when the country is facing soaring food inflation and markets are in the middle of a festive season, trade sources told S&P Global Platts.

India, the top buyer of vegetable oils in the world, introduced stock limits on edible oils on Oct. 10 to reign in high domestic prices by regulating how much inventory wholesalers and retailers can carry.
As per the order, state governments will determine their stock limits after considering available stocks and consumption patterns. However, the ruling currently excludes exporters and importers.

“I am totally booked for next month as I have received enough nominations for an import cargo, mainly CPO [crude palm oil] and CDSO [crude degummed soybean oil],” said Smit Chandan, a liquid storage terminal operator at Kandla, one of India’s largest and busiest ports.

Despite record imports of palm oil in September, stocks will be lower by the end of October as local offtake has been very strong in the month, Anilkumar Bagani, head of research at vegetable oil brokerage Sunvin Group told Platts.

India’s edible oil imports during September set a record of 1.69 million mt, up 66% year on year. Of this, palm oil products accounted for 1.26 million mt, according to data released by national trade body the Solvent Extractors’ Association of India on Oct. 13.

As on Nov 1, the cost of crude palm oil CFR west coast India was $1,382.5/mt, up 75.6%% from $787.5/mt on Nov. 2, 2020, according to Platts data.

India imports unrefined vegetable oils to its network of port-based warehouses and refineries to augment its domestic supply of edible oils. The country’s annual palm oil imports range between 8 million mt and 9 million mt, which usually accounts for anywhere between 50%-60% of total vegetable oil imports, followed by soybean oil and sunflower oil.

Government-mandated stock limits will essentially reduce the local offtake from wholesalers and retailers in time as they prevent hoarding, but India’s palm oil imports will be steady due to low import duties, Subhranil Dey, a commodity trading analyst at Targray said.

On Oct. 13, India reduced its base import duty on crude palm oil, crude soybean oil and crude sunflower oil to zero. This was the third such reduction of edible oil import duties in as many months.

Trade sources expressed concern that the local supply chain may be disturbed if the stock limit regulations are not carefully calibrated to reflect current consumption rates.

“The distributors, refiners and retailers, basically the supply chain management companies will get impacted,” Vivek Pathak, director of the commodity trading firm Athena Tradewinds told Platts. “Importers can continue to buy but they also will not be allowed to hold stocks over two months.”

Earlier in the year New Delhi announced stock limits on pulses and sugar to control food inflation domestically.

S&P Global Platts

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