1. Import of Crude
palm oil
A Project report
by
Rahul Khetawat
1/13/2010
2. Table of Content
Index Page No.
World Consumption pattern of Edible oil 3
Edible oil Consumption in India 4-5
Branded oil V/s generic oil 6
India’s Edible oil Production 7
India’s import of vegetable oil 8
India’s Supply and demand analysis 9
Status of vegetable oil industry in India 10
Import tariff on vegetable oil 11
Crude Palm oil Market in India 12
Crude Palm oil Import Process 13-14
2
3. Pricing technique for imports 15-16
Trade Terms in CPO Import 17-18
Quality Specification for CPO 19
Major Exporters of CPO 20-21
Major Importers of CPO 22-23
Global Consumption Pattern of edible oil
Chart No.1
3
4. 2008-09 : 163.14MT
Sun flower oil
8%
Palm oil
27%
Palm oil
Others Fats
25% Soya oil
Rape oil
PKO & CNO
Others Fats
Sun flower oil
PKO & CNO Soya oil
5% 22%
Rape oil
13%
Source: Oil world report
Edible oil consumption in India
4
5. The Indian edible oil market is the world’s third largest market after America and china. A
growing population and increasing rate of consumption and increasing per capita income are
accelerating the demand for edible oil in India.
India is the leading player in edible oil and world’s
largest importer ahead of European Union and China and world’s third largest consumer after
(China and European Union). Each year, India consumes 16Mn tons of edible oil, the per capita
consumption is 14.5Kg p.a. This is very low as compared to the world’s average of 23.5Kg P.a.
there is extreme variation in consumption country’s top 10% population consume 20kg p.a. and
bottom 30% consume 5kg p.a. Domestic supply is estimated 8.2Mn ton and rest is imported by
2012-13 per capita consumption is expected to be 16-17kg p.a.
Popular cooking medium used in India includes sunflower oil, mustard
oil, Groundnut oil, Soyabean oil, palm oil and coconut oil. Mustard, soyabean and palm oil
accounts 75% of total edible oil consumption only around 16% of Indian households consume
branded edible oils among the branded oils. refined oil accounts for 60% of the consumption and
crude oil accounts for the balance. Branded edible oil penetrated 31% of households in urban
areas and 9% in rural area. Edible oil sector in India is largely unorganized with few organized
players.
Regional Consumer preferences in India
Mustard North East, Central North and East
Groundnut West
Palm Central and south
Soyabean North and Central
Sunflower Largely consumed in urban area but in lower quantity.
India’s Consumption of edible oil in (‘000 tons)
Table No. 1
5
6. 2007-08 2006-07 2005-06 2004-05 2003-04
Soyabean oil 2250 2550 2850 2700 1900
Cotton oil 900 900 720 660 520
Ground nut 880 580 1020 950 1100
oil
Sun oil 580 780 680 500 500
Rape oil 1750 2150 2250 1420 1700
Sesame oil 120 120 160 200 200
Palm oil 4710 3925 3150 3436 3500
Laurics 600 600 450 450 500
Rice bran 720 680 650 600 600
others 225 225 350 350 200
Total 12735 12510 12280 11366 10820
Source: Dorab. E. mistry’s Report presented at CIOOC
Key highlights
Consumption of palm oil is Crushing of local oil seed is
rapidly growing in India due to decreasing due to lower crushing
price competitiveness. Branded V/s Generic oil
margins.
Chart No. 2
6
7. 80
70
60
50
40 Edible oil
75
30
20
10 25
0
Branded oil Generic oil
Source: Dorab. E. mistry’s Report presented at CIOOC
Key Highlights
The branded segment of the pie
Indian Edible oil market size
is 25% and it’s growing at
Estimated Value: 750bn INR 25-30% p.a
India’s edible oil production in (‘000 tons)
Table No.2
7
8. 2008-09 2007-08 2006-07 2005-006 2004-05
Soyabean oil 1200 1445 1280 1140 900
Cotton oil 1000 1050 920 755 660
Ground nut 450 900 580 950 970
oil
Sun oil 500 550 580 620 470
Rape oil 1900 1750 2150 2250 1570
Seasame oil 160 120 120 125 200
Coconut oil 400 380 380 400 400
Rice Bran oil 700 720 680 660 610
Others oil 440 250 225 200 200
Total 6600 7145 6915 7100 5980
Source: Dorab. E. mistry’s Report presented at CIOOC
Key Highlights
India’s edible oil production has
significantly improved since 2000
but still not able to achieve self
sufficiency into it. But last year due
to lack of monsoon production was
low.
India’s Import of Vegetable oil
Table No. 3
Qty in M.T 2008-09 2007-08 2006-07 2005-06 2004-05
8
9. Crude Soya 9,89,613 7,59,433 13,22,920 17,03,860 20,01,745
oil
Crude Palm 51,87,063 40,44,063 29,94,225 23,72,681 23,60,573
oil
Sun oil 5,90,175 26,490 1,95,245 1,00,843 1,86,684
RBD 12,40,018 7,30,794 1,15,142 1,13,491 4,22,735
palmolien
Crude Palm 1,07,622 26,264 9,672 26,840 32,558
kernel oil
others 68,869 21,366 66,436 99,618 37,312
Total 81,83,360 56,08,410 47,14,760 44,16,833 50,41,607
Source: http://www.seaofindia.com/oilimport_data/Importdata_Oct._2009.pdf
Key highlights
Edible oil import bill is second Palm is the highest imported
largest import bill of India after commodity by India its import
crude oil. As per sea report last value is significantly increasing
year Rs. 28000cr. Of edible oil due price parity and zero import
were imported by India. duty and it can blend in any oil.
9
11. India’s Supply and Demand Analysis
All Values in (‘000 tons) Table No. 5
Source: Dorab. E. mistry’s Report presented at CIOOC
India’s S&D for 2008-09 2007-08 2006-07 2005-06
Opening Stock 1025 750 750 915
Productions 6600 7145 7135 7370
Imports 8600 6300 5940 5815
Consumptions 14925 12995 12735 13000
Exports 100 175 175 200
Closing Stock 1200 1025 915 900
Per Capita 12.86 11.40
Consumption
Key highlight
Shameful
paradox
of Indian
agricultur
Indian soyabean farmers are
getting less MSP than his
American counterparts. Now avg.
size of soya farm is less than 2
hectare and productivity is 1/3 of
Status of Vegetable oil Industry in India as on April 2008
u.s. and brazil its affects our self-
sufficiency targets. 11
12. Table No.6
Source: Sea report
Type of oil No. of unit Annual Production Avg. Capacity
Capacity (Lac MT.) utilization
Oil Seed Crushing 150000 425 in terms of seeds 10-30%
units
Solvent Extraction 779 419 in terms of oil 33
unit bearing material
Refineries attached 127 51 in terms of oil 45
with vanaspati units
Refineries attached 225 37 in terms of oil 29
with solvent unit
Independent 585 35 in terms of oil 36
refineries
Total refineries 937 123 in terms of oil 37
Vanaspati unit 268 58 in terms of 19
vanaspati, Bakery
shortening &
margarine
Crude Palm oil Market in India
12
13. Indians are consuming all the palm oil produced in Malaysia and Indonesia. India is the largest
importer and consumer of edible oils in the world and the country imports nearly 3.5-4 million
tons of palm oil annually mainly from Malaysia and by Indonesia.
India is dependent on palm oil imports for over 25% of its annual edible requirement. There has
been a sharp rise in the imports of palm oil into the country during the post 1998 period.
Rising consumption of palm oil in India is mainly attributed to its price competitiveness among
several of its competing oils is being met through increasing imports. The import is mainly
through the ports of Kandla, Kakinada, Kolkata, Mangalore, Mundra, Mumbai and Chennai.
Palm oil supports many other industries in India like refining, Vanaspati and other industrial
sectors apart from human consumption as RBD palmolein.
The major importing and trading centers for palm in India are Chennai, Kakinada, Mumbai and
Kandla. The other centers like Mundra, Kolkata, Mangalore and Karwar also play important role,
but next to the four major trading centers. Besides these palm oil trade in India is influenced by
the supply-demand scene in the domestic market, including the factors influencing various
oilseed production in the country, prices of various domestically produced and imported oils,
production and trade policies of the Government- mainly the export-import policy, over-all
health of the economy that has a bearing on the purchasing power of ultimate consumers, etc
The entire industry of CPO in India is dominated by importers, large refiners, corporate involved
in wholesale and retail trade through value-addition and retail-regional level players along with a
few National level players. The industry is dominated by over 200 importing Companies, who
are mostly refiners too.
Import Duty Structure for Vegetable oil
Table no.7
13
15. Dec, 2009 137656 476937
Jan,2010 131876 512516
Feb,2010 131160 387918
March,2010 95227 311818
April, 2010 67604 270822
Total 676127 2410163
Source: http://www.seaofindia.com/oilimport_data/Importdata_April_2010.pdf
Factors Driving Prices of Palm oil in India
1. Palm oil production in Indonesia and Malaysia.
2. Demand of byproducts of palm oil.
3. Production of oil Seeds in India.
4. Crude oil prices in international market.
5. Production of soyabean in America, Argentina, Brazil.
15
16. 6. Import duty and export duty.
7. Prices of domestic oil seeds
8. Price discount of palm oil to soya oil
9. Interest rates
Crude Palm oil Import Process
Supplier’s selection
Reference check of supplier in Local
and international market
16
17. Negotiation of trade term with supplier
Supplier issue soft offer to buyer with
price and tentative delivery dates
Buyer issues irrevocable corporate
purchase offer with full banking co-
ordinates and bank comfort letter
Seller issue full corporate offer and
NCNDA to buyer
Buyer accepts the terms and
conditions of the FCO by endorsing &
sealing the FCO and returns it together
with NCNDA to seller.
Crude Palm oil Import process Contd…
Seller issue, signed sale and purchase
agreement to buyer
Buyer duly signed and sealed the
contract and returns it to seller with 17
draft of letter of credit.
Within 5 days, Buyer's bank sends the
Buyer's bank sends POF to show
operative Letter or Credit that activates
Seller’s bank issues to Buyer’s bank as
readiness to and shipmentof Credit
Delivery sends Letter commence
the Performance Bond 2%. contract
the Proof of Product (POP)
as per per contract
scheduled in
18. Pricing for Crude Palm oil Import
Palm oil prices in India depend on the imported palm oil from Malaysia and Indonesia at
the various ports. The prices in these countries are directly reflected in the trend of the
palm oil prices at Indian ports.
Kualalmpur stock exchange (KLSE) is benchmark for crude palm oil trade in both
physical and future side. But for import transaction generally two types of pricing
methods are practiced.
Formula driven pricing – This type of pricing technique generally used in free
on board transactions it means supplier will deliver goods at load port only afterwards
its buyers responsibility. In this type of transactions seller never ever disclose final
price of goods. He will offer certain percentage discount on KLSE price. But final he
18
19. will the day when you will tell him that today we are going to raise the LC so
Closing MPOB price of a previous working day on the date of LC openig minus
discount will be effective for you.
Cost elements
1. Cost of product
2. Transportation cost for taking oil to the load port.
3. All Taxes and Duties (At load port only)
4. Shore tank charges ( place where oil will store on port)
5. Inspection Charges.
6. Cost Involved in loading of oil into the vessel.
7. And other expenses will involved in final pricing.
Fixed Pricing – This type of pricing generally used in CIF transactions. In this
type of transactions seller takes responsibility of delivering good at destination port. The day we
signed sale purchase agreement price get locked. After signing of contract buyer has to raise the
LC in 5 banking days.
Cost Elements
1. Cost of product
2. Transportation cost for taking oil to the load port.
3. All Taxes and Duties (At load port only)
4. Shore tank charges ( place where oil will store on port)
5. Inspection Charges.
6. Cost Involved in loading of oil into the vessel.
7. Cost of insurance
8. Vessel freight
19
20. 9. Other Charges.
Trade Terms/International commercial terms
1. Free on Board - In this trade condition seller has to deliver good vessel designated by buyer
and he will have bear entire expenses till loading.
2. Cost and freight – in this commercial term seller has to arrange vessel for shipment of good
and he will have bear all the expenses till loading he will also pay freight of vessel.
3. Cost Insurance freight – this is very much similar to the cost and freight but in this term
seller also takes responsibility of marine insurance and pays insurance premium for the safety of
goods.
20
21. Extension of this term is Shipped weight and quality final at unload port- Seller takes
responsibility of everything till unloading of good at destination. But in this term seller can’t
discount LC only after loading he will have to wait for final quality and quantity report which
will be issued at unload port. This is the safest trade term for a importer because it ensure 100%
quantity and quality of product.
Quality Specification for CPO
Palm oil refiners association of Malaysia (PORAM) quality
specifications is acceptable in entire globe for crude palm oil trade.
No. Parameters Specification
1 Free Fatty Acid (% as PALMITIC) 5% Max
21
22. 2 Moisture & Impurities 0.5% Max
3 Iodine Value 50-55 Min
4 Melting Point 33-39 Deg Max
5 DOBI 2.31 deg Min
6 CLOUD POINT (OC) 3.5R 3.5Y
7 Temp During Voyage 32 Min / 40 Max
8 Temp at time of Loading / Discharge 50 Min / 55 Max
Source: http://www.poram.org.my/v1/
Major exporters of crude palm oil
1. Agri Trade international, Singapore
Agri trade has been trading palm oil for the past 30 years and has an extensive global network of
suppliers and customers that is steadily growing. Having an established network around the
world with good partners allows Agri trade to do the distribution of palm products to countries
like India, China, Malaysia and Indonesia. This distribution channel helps complete the supply
chain of the palm oil business and Agri trade is targeting to expand this business to more
emerging markets. With 85% of Agri trade’s trading activity derived from palm related
activities, the Palm Oil Division is an instrumental part of Agri trade’s business success.
Agri trade’s niche in the palm business is centered around our ability to source for good quality
oil direct from the plantations and oil mills of Malaysia and Indonesia. Agri trade has many joint
ventures with oil palm plantations, mills and refineries for sourcing crude palm oil and the
manufacture of end-user products from crude palm oil and palm kernel oil.
22
23. 2. Felda marketing services Sdn. Bhd.
70 palm oil mills all over Malaysia have a combined rated capacity of 3,267 tons/hour. In 2009,
they processed 15.16 million tons of FFB to produce 3.11 million tons of CPO. This accounted
for almost 8% of global production and 18% of Malaysia's total output. Palm Kernel produced
was 0.82 million tons. In the plantation sector, world's largest single Group plantation
management extends to some 326 FELDA and smallholder estates covering more than 555,456
hectares. 96% of these are planted with oil palm.
3. Golden Agri International
The world's second largest oil palm plantation in terms of planted hectarage, with the largest total
land bank. The Group has vertically integrated operations that capture returns from all levels of
the value chain. The Group's revenue in 2009 was US$2.3 billion, with total assets of US$7.9
billion.
4. Sime Derby
Managing over 80,000 hectares of oil palm estates in Peninsular Malaysia, Sabah and
Kalimantan, as well as operating 8 mills in these areas to extract CPO. Marketing activities of
CPB’s CPO is handled internally via Commodities Trading Malaysia.
5. Wilmar International Ltd.
Wilmar is the largest global processor and merchandiser of palm and lauric oils, a major oil palm
plantation owner and the largest palm biodiesel manufacturer in the world. perate over 160
processing plants and employ 60,000 people in more than 20 countries, with a primary focus on
Indonesia, Malaysia, China, India and Europe. Through an extensive distribution network, our
products are sold to more than 50 countries globally.
6. Astra Agro, Indonesia
PT Astra Agro Lestari Tbk manages more than 250.000 hectares of oil palm plantations,
spreading in Sumatra, Kalimantan and Sulawesi with the average age of its plantations are 14
years, the peak productive age period. Up until the end of 2008,
7. Inter-Continental Oils & Fats Pte Ltd.
8. Virgoz oil and fats
9. Global Advance oil and fats
23
24. Source: All data collected from related company’s websites
Major Importers of Crude Palm oil in India
1. Ruchi Soya
Ruchi today holds edible oil refining capacity of about 2.2 million tones per annum and process
nearly 1.5 million tones of imported crude oils namely Palm Oil, Soyabean Oil and Sunflower
oil. Ruchi soya is one of the few edible oil companies in the country that has a balanced mix of
inland and port based refineries. This enables them to optimize production depending upon the
availability of various alternatives – local oilseeds or imported crude oil. Moreover, multi-
location refineries have reduced road travel costs leading to significant transportation cost
advantage. They have sixteen refineries at various locations and 14 inland crushing plants.
2. Adani Wilmar Ltd.
The company has production infrastructure across the country with a crushing capacity of over
6000 TPD (Tonnes per Day) and Refining capacity of over 5000 TPD. AWL is one of the very
few national players in the Industry to have this massive production infrastructure, with all its
plants so strategically located to take advantage of the Import Parity and Domestic crop season.
3. Emami Group
24
25. The company's Haldia refinery currently has capacity of producing 1,200 tonnes of edible oil per
day On the domestic front, Emami is setting up two new edible oil refineries in Andhra Pradesh
and Gujarat at an investment of about Rs 600 crore. The two new plants are expected to go on
stream in two to three years and the firm's total capacity will increase to 4,200 tonnes per day
from the current 1,200 tonnes per day.
"The refinery in Andhra Pradesh will have a capacity of producing 1,500 tonnes per day, while
the Gujarat units will also have a similar capacity,"
4. K.S oil Ltd
Company’s oil refinery in one of India's most well connected ocean ports, Haldia, with a
capacity of a 500 metric tonnes per day; it also has 4 inland refineries with total capacity of
1,200 metric tonnes per day.
5. Gokul Refoil ltd
Company’s oil refining capacity is 750000mt. p.a. And all the plants are strategically located.
6. Godrej Agrovet ltd.
Godrej Agrovet has developed 35000 hectares of oil palm in the States of Andhra Pradesh, Goa,
Karnataka, Gujarat, Tamil Nadu, Orissa and Mizoram and Planning to invest 1 billion rupees
($22 million) in the next five years building refineries to process production from more than
100,000 hectares they have Factories in Andhra Pradesh, Goa and Tamil Nadu.
7. Vijay Solvex Ltd.
8. Bunge Ltd.
9. National Dairy Development Board
25
26. Mode of Payments for import of Crude Palm oil
Letter of Credit
A standard, commercial letter of credit is a document issued mostly by a financial institution,
used primarily in trade finance, which usually provides an irrevocable payment undertaking.
The letter of credit can also be source of payment for a transaction, meaning that
redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in
international trade transactions of significant value, for deals between a supplier in one country
and a customer in another.
Type of Letter of credit used in CPO transaction
1. Irrevocable Transfferable Sight LC –
Seller can transfer this LC to 3rd party if he wants to do that. Generally traders demand this type
of LC and 3rd party can receive payment from bank after producing all necessary documents.
2. Irrevocable Sight LC –
This LC cannot be transferred by seller only beneficiary can discount that LC.
26
27. 3. Irrevocable Transfferable usance LC –
In this type of credit bank provide credit to buyer for making payment in other word bank pays
on the behalf of buyer as per guidance of buyer and sale &purchase agreement. Seller can
transfer this LC to 3rd party. After certain time period buyer pays to bank.
4. Irrevocable usance LC
Same as above but in this type of LC seller cannot transfer it to 3rd party.
Documents required for LC discounting
1. IF trade term is free on board (FOB)
a. Commercial invoices in three (3) copies showing Contract No., the DLC No., and description
of goods.
b. Delivery Order.
c. Survey report issued by Sucofindo or Sgs surveyor .
d. Full set of clean "On Board" Bill(s) of Lading three (3) originals and four (4) duplicate copies,
made to order a blank endorsed marked freight prepaid, to notify applicant and
applicant’s bank, evidencing shipment of goods as described above.
e. Certificate of shipped quality and quantity ascertained at port of loading and issued by an
independent surveyor; Each certificate shall be issued in three (3) originals and three (3)
duplicate copies.
f. Certificate of Analysis, issued by Sucofindo/SGS Surveyor Company.
g. Packing List Cargo Manifest in 1 (one) original and two (2) copies.
27
28. h. Certificate of Origin shall be endorsed by any Local Chamber of Commerce or relevant
authority in beneficiary country- three (3) copies.
2. IF trade term is Cost Insurance and Freight (CIF)
a. Commercial invoices in three (3) copies showing Contract No., the DLC No., and description
of goods.
b. Delivery Order.
c. Survey report issued by Sucofindo or Sgs surveyor mutually agreed.
d. Full set of clean "On Board" Bill(s) of Lading three (3) originals and four (4) duplicate copies,
made to order a blank endorsed marked freight prepaid, to notify applicant and
applicant’s bank, evidencing shipment of goods as described above.
e. Certificate of shipped quality and quantity ascertained at port of loading and issued by an
independent surveyor; Each certificate shall be issued in three (3) originals and three (3)
duplicate copies.
f. Certificate of Analysis, issued by Sucofindo/SGS Surveyor Company.
g. Packing List Cargo Manifest in 1 (one) original and two (2) copies.
h. Certificate of Origin shall be endorsed by any Local Chamber of Commerce or relevant
authority in beneficiary country- three (3) copies.
I. Transit Insurance Certificate
J. Certificate issued by shipping company certifying that vessel is sea worthy and not more than
25 year old.
28
