India is the world's largest importer of edible oils due to strong domestic demand and constraints on domestic production. While domestic consumption is growing steadily, domestic oilseed production remains low and inefficient. As a result, India relies heavily on imports, primarily of palm and soybean oils, to meet consumption needs. Liberalized trade policies since the 1990s have reduced import barriers and tariffs, ensuring a steady supply of affordable imported oils to the Indian market.
2. Executive Summary
Edible oil imports have been liberalized since the 1990’s and now attract lower tariffs
No import duty on crude oils in contrast to finished products (refined oils and hydrogenated fat)
Market India is the world’s largest importer of edible oils and market demand is expected to sustain
Loose or unbranded oil accounts for bulk of sales compared to branded and hydrogenated oils
Loose or unbranded oil accounts for bulk of sales compared to branded and hydrogenated oils
Demand for imported oils to remain strong due to growing consumption and constrained supplies
Organized sector, earlier disadvantaged due to sales tax regime, is not growing its market share
Characteristics
Domestic production faces supply‐side constraints and inefficiencies thereby ensuring the
dependence on large levels of edible oil imports
Rising consumption accompanied by increasing domestic production but large imports are still
Rising consumption accompanied by increasing domestic production but large imports are still
necessary to bridge the gap
Trends Palm and soybean oils account for bulk of imports due to their low prices
Prices have risen at 3% p.a. with a dip observed only in 2005‐2006
IMPORTED EDIBLE OILS – INDIA.PPT 2
4. Edible oil imports have come a long way towards becoming
liberalized and attracting lower tariffs
1970s
In mid‐70’s, government changed import policy and allowing the import of edible oil under a state monopoly
1980s
In the 80’s, government adopted a policy of self sufficiency by increasing domestic oilseed production under its
Technology Mission for Oilseeds (TMO) programme, which resulted in a temporary surge in oil production
• Strong boost in imports due to trade liberalization and falling domestic oil seed production
• 1994: Imports placed under Open General License (OGL) system terminating the state monopoly and
0s
eliminating import quota restrictions
eliminating import quota restrictions
1990
• Since 1998, the Government has been adjusting the tariff rates to
Protect domestic oilseed producers and processors
Smoothen the effect of fluctuations in world prices on the domestic consumers
2000s
Since 2000, the government made frequent policy adjustments, which brings a level of uncertainty to overall
import demand and for different oils
IMPORTED EDIBLE OILS – INDIA.PPT 4
7. India is the largest importer of edible oils and the growing
economy is expected to sustain demand in the market
Overview Size and Growth
• World’s largest net importer of edible oils since 1999 ‘000 MT
• Large population and rising per capital consumption are 6,000 +1%
key drivers for this essential commodity
5,500
• Imports account for 45% of total consumption
5,000
• Imports have risen by 1% since ’04‐05 while total
domestic production has risen by 3% 4,500
• Palm and soybean oils dominate imports 4,000
• Branded oils account for ~20% of total market 2004‐05 05‐06 06‐07 07‐08 08‐09
Regional Consumption Largest Trading Partners (2003‐2008)
Others
Mustard North, Central and East Brazil 11%
5%
Peanut West
Malaysia 13%
Palm Central and South 49% Indonesia
Soybean North and Central
22%
Sunflower
Sunflower Primarily in urban areas
Primarily in urban areas Argentina
A ti
IMPORTED EDIBLE OILS – INDIA.PPT 7
9. Loose or unbranded oil without proper packaging accounts for a large
portion of sales compared to branded and hydrogenated oils
Loose Oil Branded Oil
• Unrefined oils sold without any consumer‐ready • Packaged pure refined oil primarily used in
packaging or brand name households
• Demand is largely driven by low income households • Available as sunflower oil (for its health benefits)
as well as institutional customers but as well as rapeseed and peanut oil
• Peanut, cottonseed, sunflower seed and rapeseed • Demand is from middle and upper class urban
oils are sold in this manner consumers
•T d
Traders often use blends, legally or illegally, to
ft bl d l ll ill ll t
increase margins
Branded Oil
20%
Loose Oil 70%
10%
Vanaspati
Vanaspati (Hydrogenated Oil)
• Fully or partially hydrogenated vegetable cooking oil is known as Vanaspati in India
• Mostly manufactured using palm oil and also from soybean oil but typically made from the
cheapest available oils meeting the required standards
cheapest available oils meeting the required standards
• Regulations mandate 25% of production to be local but this rule is not effectively enforced
IMPORTED EDIBLE OILS – INDIA.PPT 9
11. Demand for imported oils will remain strong due to growing
consumption and constrained supply side
Domestic consumption – Edible oils Domestic Production ‐ Oilseeds
Consumption % Growth ‘000 MT
‘000 MT
Growth 12,563 6 40,000
13,004
13 004
13,000
4 30,000
12,106 11,959
12,000 11,574 2 20,000
11,000 0 0 10,000
10,000 ‐2 0
2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008
• Low but growing domestic consumption
Low but growing domestic consumption • Low and inefficient production levels of oilseeds
Low and inefficient production levels of oilseeds
Low per capita consumption of 12 kg compared to world Virtually stagnant averaging at 28.3 mtpa
average of 18.7 kg Yields are also significantly lower than the world average
Yet overall consumption has grown at a healthy rate of 3%
Economic development is Since importing oilseeds is
likely to increase per capita not practical due to
consumption and spur the barriers, oil imports
market become necessary
IMPORTED EDIBLE OILS – INDIA.PPT 11
12. The organized sector, which was at a price disadvantage earlier,
is now competing effectively and growing its share of the market
Pre‐VAT regime Introduction of VAT regime in 2006
•Large unorganized sector dominated overall •Since April 2006, VAT made compulsory and
sales due to a price advantage derived from: enforced rigorously
Evasion of sales tax: 4% difference enjoyed over •Sales tax compulsory on raw material
organized sector purchase. Therefore if finished product was
Use of cheap or no packaging sold without charging sales tax, sellers would
Blending with cheaper or alternative oils lose out on sales tax credit
•Typically products were sold for cash without
charging any sales tax
Restricted growth of organized sector Effectively the 4% differential
who were at a competitive disadvantage
h t titi di d t disappeared levelling the playing field
disappeared levelling the playing field
+8%
19% 18% 18%
16%
13%
Share of
13%
organized
sales
g
growing g
2002 2003 2004 2005 2006 2007
IMPORTED EDIBLE OILS – INDIA.PPT 12
15. Rise in consumption is accompanied by increasing domestic
production but large imports are still necessary to bridge the gap
Domestic consumption & supply Imports vs. domestic production
‘000 MT Consumption
Production Production Total in 000 MT
Total in ‘000 MT
14,000
14 000
Imports Imports
10,713 11,226 11,705 12,457
12,000 11,099 10,187 12,139 11,957 13,080
100%
10,000 90%
80% 46%
8,000 54% 47% 59% 53% 58% 54% 56% 55%
70%
60%
6,000
50%
40%
4,000
30% 54%
46% 53% 41% 47% 42% 46% 44% 45%
2,000 20%
10%
0 0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009
IMPORTED EDIBLE OILS – INDIA.PPT 15
16. Palm and soybean oils account for bulk of imports is primarily
due to their low prices and price sensitivity of Indian consumers
Total in ‘000 MT 5,700 4,906 5,530 5,488 5,955 Sunflowerseed Oil
3% 0% 3% 2% 3% 3% 4% 0% 4% 2% Others
13% 13% SoybeanSoyabean Oil
36% 25%
35% Palm Oil
83% 82%
69%
62% 59%
2004‐05
2004 05 05‐06
05 06 06‐07
06 07 07‐08
07 08 08‐09
08 09
Product Share of import Import growth Growth in domestic production
Palm oil 83% 9% 6%
Soybean oil 13% ‐21% 13%
Sunflower seed oil 2% 134% Nil
Others 2% 10% Nil
IMPORTED EDIBLE OILS – INDIA.PPT 16
17. Prices have risen at 3% p.a. with a dip only in 2005‐2006
Edible Oil Wholesale Price Index1 Domestic price of imported oil
WPI of edible oil
% INR per tonne RBD Palmolein
Inflation rate
200 175 8 50 Crude Degummed
g
158 156 155
146 40 Soybean Oil
150 6
(Ex‐Mumbai)
30
100 4 Crude Palm Oil (5%)
20 (Ex‐Kandla)
50 2
10
0 0 0
03‐04 04‐05 05‐06 06‐07 07‐08 2003 2004 2005 2006 2007
1 – Base Year: 1993‐94 = 100
Product Average % Variation in WPI
1998‐1999 to 2002‐2003 2003‐2004 to 2007‐2008
Gingelly Oil 7.08 6.17
Rapeseed/Mustard Oil
Rapeseed/Mustard Oil 8.64 6.79
Coconut Oil 0.94 3.89
Groundnut Oil 6.97 7.29
Cotton Seed Oil 5.78 5.60
Soybean Oil 7.22 3.23
IMPORTED EDIBLE OILS – INDIA.PPT 17
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IMPORTED EDIBLE OILS – INDIA.PPT 18