Edible oil price set for 7-8% rise as import costs bite
India’s edible oil companies may raise prices by 7-8% before Dussehra-Diwali as higher import costs, rupee weakness, freight and firm global prices squeeze margins. However, improving supplies and possible import-duty cuts could limit the increase in domestic edible oil prices.
India’s edible oil companies are considering raising prices by around 7-8% ahead of the Dussehra-Diwali festive season as higher import costs squeeze margins, industry sources said, although improved supplies and possible changes in import duties could limit the increase.
The move would mark the third round of price increases since March. Major edible oil companies raised prices by 5-6% in two rounds beginning in March, taking cumulative increases to 10-12% between March and June.
The latest pressure on prices comes from higher landed costs of crude edible oils, with a weaker rupee, elevated freight and insurance expenses and firm global vegetable oil prices adding to the burden on refiners and processors.
Data from the Solvent Extractors’ Association of India (SEA) showed crude palm, soybean and sunflower oil landed at Mumbai ports on September 18 at $1,265, $1,314 and $1,380 per tonne, respectively. Palm and soybean oil costs were 11% higher than a year earlier, while sunflower oil was up 7%.
“The landed cost of crude edible oil has gone up by about 8 to 11%. Businesses may have no option but to pass this on,” said Aditya Agarwal, director, Emami Group. The group has Emami Agrotech, which has edible oil brands such as Healthy & Tasty and Best Choice.
The extent and timing of any increase will depend on demand and supply conditions, he added. Imports and inventory levels could provide some relief. The arrival of vessels carrying crude edible oil is expected to improve availability, potentially limiting the extent to which higher international costs are passed on to consumers, industry experts said.
Any change in India’s import duties could also alter the pricing outlook. The government is said to be considering cutting import duties on vegetable oils to contain rising domestic prices.
BV Mehta, executive director of SEA, said global cooking oil prices had risen 15% amid the West Asia conflict, while rupee depreciation had added another 10% to costs.
“Higher freight, insurance costs, depreciation of rupee and oil exporting countries diverting cooking oils for biofuel have impacted the global prices,” Mehta said.
Domestic retail prices are already above year-ago levels. Average retail prices of mustard, soybean and palm oils stood at Rs 202.62, Rs 166.73 and Rs 192.56 per kg, respectively, on Monday, according to the Department of Consumer Affairs’ price monitoring cell. The three oils were 7.5%, 13% and 19% more expensive than a year earlier.
India imports more than 58% of its edible oil requirement, making domestic prices sensitive to movements in global markets and the rupee. Palm, soybean and sunflower oils account for most of the country’s annual edible oil consumption of about 25-26 million tonnes.
The industry is also monitoring risks to global supply, including the potential impact of El Niño, uncertainty over sunflower oil supplies linked to the Russia-Ukraine conflict and Indonesia’s B50 biodiesel programme.
“Fresh price hikes will depend on how edible oil prices move,” said Shrikant Kanhere, MD & CEO of AWL Agri Business. “If crude oil remains elevated and geopolitical risks persist, price increases in edible oil cannot be.
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Source : The Financial Express
