By Shrikant Kuwalekar and Kaushal Verma
MUMBAI – Growth in edible oil consumption in India has slumped, in part due to higher global prices and a weaker rupee, according to Emami Agrotech.
"The consumption growth (in edible oils) has slowed to say about 2.0-2.5% from 4.0-4.5% earlier," Sudhakar Desai, chief executive officer of the Kolkata-headquartered company, told Cogencis in an interview.
"A rise in global prices, coupled with a weaker rupee, has made edible oils pricier for Indian consumers," Desai said, adding high import duties of 45-55% had contributed to the rise in domestic prices, hurting consumption.
Prices of palm oil, sunflower, mustard and soyoil have risen 5-10% in the last four months due to tight supply in the global market, among other factors.
India is the world's largest importer of edible oil, shipping in around 15 mln tn annually to cater to 70% of the domestic requirement. In the decade to 2015, such imports increased around 12% a year. Since then, however, they have been stable at 14.5-15.1 mln tn a year, as availability of domestic edible oils increased.
Desai says India's 1-trln-rupee edible oil industry has been plagued by various bilateral treaties and finding a solution through policy change is a priority. Desai, also the national president of Indian Vanaspati Producers' Association, said he was pursuing the matter with the Prime Minister's Office.
On his plans for the company, Desai said Emami Agrotech sought to become a pan-India edible oil player in 18-24 months by expanding its refining business in Kandla and Mangalore. The company accounts for around 45% of the Emami group's turnover.
Following are edited excerpts of the interview:
Q. How prepared is the industry to tackle the challenges from bilateral treaties ?
A. Currently, the 1-trln-rupee edible oil industry is going through extremely challenging times. The government has recently raised the import duty on Malaysian refined palm oil to 50%, while retaining that on the crude variety at 40%, which has helped the local refining industry. However, from Jan 1, as per the decade-old treaty, the duty on oils imported from members of the Association of Southeast Asian Nations, both Malaysia and Indonesia in this case, will come down to 37.5% on crude and 45.0% on refined oils. This will trim the difference between the two to 7.5%, posing a threat to the domestic refining industry due to a likely surge in import of refined oils.
Another treaty that has posed a major challenge for the industry is the South Asian Free Trade Area pact signed in 2006, under which countries such as Bangladesh, Bhutan and Nepal have been pushing large quantities of duty-free edible oils into the country through the eastern borders. Emami, being a major player in the east, has been hit badly in terms of sales in Bengal, north-east Bihar and Jharkhand.
As president of the Indian Vanaspati Producers' Association, I have been pursuing the matter with the government and have sought that edible oils be dropped from the list of goods getting zero duty benefit. Not only edible oils, the vanaspati industry is also threatened by zero-duty imports from Sri Lanka and Nepal, when local manufacturers are forced to pay 45% duty on crude palm oil.
Q. What is the potential for producing biofuel from edible oil, given the government's thrust on preparing ethanol from sugarcane?
A. India's biofuel policy has no clarity. Currently, India produces 150,000-170,000 tn of biodiesel from by-products generated during refining of edible oils. This production can easily be scaled up to 500,000 tn if the government scraps the goods and sales tax on biofuel produced by the edible oil industry. Globally, the edible oil and biodiesel industries go hand-in-hand. Emami Agrotech is the largest biodiesel supplier to Indian railways and also to oil marketing companies. Currently, we can supply 10,000 tn of edible oil-based biofuels a month if the government exempts the product from goods and services tax or cuts the rate substantially.
Q. What are Emami Agrotech's plans ?
A. We have recently scaled up the capacity of our Haldia unit by 2,000 tn a day to 6,000 tn a day, making it one of the largest edible oil refineries. We had also added capacity of 1,200 tn a day at Krishnapatnam about six months ago, raising it to 2,200 tn per day. Work on the 2,200-tn-a-day port-based Kandla refinery will be completed in 15 months, after which Emami Agrotech's capacity will be 10,000 tn a day. Starting of the Kandla unit is our priority, as this will reduce our distribution costs for the branded oil portfolio. Eventually, our edible oil refining capacity will stand at 12,000-15,000 tn a day, and we will have a share of around 10% in the country's edible oil market, once the Mangalore refinery is completed by mid-2021. End
Edited by Avishek Dutta