Firms renege on veg oil imports as prices fall

NEW DELHI: Vegetable oil traders are reneging on contracts to import palm oil as they expect benchmark Malaysian prices, which sank to a nine-month low this week, to fall further, a leading trade official said on Thursday.

"Amid falling prices, Malaysian traders complain that some Indian traders are backing out of deals and have stopped issuing letters of credit," Solvent Extractors' Association President Ashok Sethia said.

"There are expectations that prices will drop further." Falling prices and an expected rise in domestic oilseed output were likely to spur the government to reimpose import tax on crude vegetable oils and allow limited exports of some oils, Sethia added.

India, the world's biggest vegetable oil importer after China, in April allowed duty-free imports of crude vegetable oils and cut the levy on refined oils to 7.5 per cent. In March, the government had banned exports of all vegetable oils for a year despite tiny overseas sales.

India imports almost half of its annual consumption of about 11 million tonnes of vegetable oils. It buys palm oil from Malaysia and Indonesia and soyoil from Brazil and Argentina.