India’s growing consumption of palm oil products translates into higher imports from Malaysia.
DEMAND for palm oil products in India the world’s second largest vegetable oil consumer after China is driven by factors such as an expanding middle class, palm oil’s relatively low prices, and stagnant domestic production levels of edible oils.
At the recent Malaysia-India Palm Oil Trade Fair and Seminar 2012 (POTS) in Mumbai, Malaysian Palm Oil Council (MPOC) market analyst Fatimah Zaharah Md Nan said India’s population and income growth would continue to push oils and fats demand in the country.
“The middle class would definitely expand. It is anticipated that by next year, the middle class will grow to 124 million households (from 46 million households in 2003).”
By 2015, it is projected that India would require 22 million tonnes of oils and fats per annum. “This is four million metric tonnes higher than what is presently consumed,” she said.
She noted that palm oil was the most popular edible oil consumed in India, with market share having grown from 8% in 1995 to 36% in 2011.
As such, India would need at least eight million metric tonnes of palm oil by 2015 if palm oil maintains its market share of around 35-37% of the total oils and fats consumption, said Fatimah at the two-day event in Mumbai, themed Managing Global Challenges Through Innovative Partnerships.
POTS India 2012 was jointly organised by MPOC and the Malaysian Palm Oil Board (MPOB), and supported by the Solvent Extractors Association of India (SEA), Central Organisation for Oil Industry and Trade, the Indian Vanaspati Producers Association (IVPA), and the Vanaspati Manufacturers Association of India (VMA).
Speakers included consultants, industry captains and experts in the oils and fats industry from Malaysia, India, the United States and Britain. The event provided a platform for industry players to network and exchange information, as well as to update them on the latest developments, market outlook and trade policies concerning the palm oil sector.
SEA president Sushil Goenka pointed out that almost 75% of India’s palm oil product imports were from Indonesia.
“The imports from Indonesia are cheaper although we prefer importing from Malaysia because of the quality and ease of dealings,” he said.
MPOC’s statistics show that India was the fourth largest importer of Malaysian palm oil last year (1.67 million tonnes) after China (3.98 million tonnes), the European Union (two million tonnes) and Pakistan (1.82 million tonnes).
Last year, palm oil exports from Malaysia to India increased by 497,910 tonnes or 42.56% year-on-year.
Palm oil is largely consumed by the lower-middle class in India as it is an affordable edible oil (priced lower by 50 to 100 Indian rupees per 10kg or US$100 to US$200 per tonne compared with other edible oils), according to GG Patel and Nikhil Research Co (India).
Its managing partner Govindbhai G. Patel pointed out that palm oil was the main oil used by the hotel, restaurant and catering sector as well as by chips and savoury snack manufacturers.
“Better marketing of palm oil in India needs to be done.
“We can propagate the use of higher quality oil such as super olein, and improve consumer awareness that palm oil contains low trans fatty acid compared with soybean oil.
“Also, there should be more marketing of palm oil in consumer packs, in order to increase household consumption,” he said.
Govindbhai added that the stagnant domestic edible oil production has led to higher imports per annum to feed the growing demand in India.
He stated that further increases in areas under oilseed cultivation, as well as competition from grains and other cash crops, were a challenge.
Low domestic production
Pawan Kumar, an associate director at Rabobank International’s Food and Agribusiness Research and Advisory team based in Singapore, said India’s domestic production of palm oil was insignificant when compared with its demand, with data projecting production to be around 100,000 tonnes for the 2010-2011 period from an estimated 150,000 hectares of plantation as of 2008-2009.
“Also, how much of the 800,000 hectares in India which have been identified for oil palm cultivation can be used efficiently?” Pawan questioned.
Govindbhai also noted that imports of edible oil are expected to continue to rise in India, which presently relies on imports to meet over 50% of its domestic edible oil requirements.
In the 2010-2011 oil year (November-October), India saw an overall demand of 15.6 million tonnes of edible oil, of which 8.37 million tonnes or 54% was imported.
For the 2011-2012 oil year, India is expected to see an overall demand of 16.35 million tonnes of edible oil, of which 9.7 million tonnes or 59% of the oil will be imported.
“The current per capita consumption of 13.5kg per annum is well below the world average of 21kg per annum, thus providing growth opportunities for the Indian edible oil industry,” Govindbhai stated.
Govindbhai also cautioned that with India heavily dependent on Indonesia and Malaysia for palm oil, it would face increased volatility in prices from weather uncertainty and limitations of plantation expansion in the supplier countries.
Thanks to India
Hyderabad-based Transgraph Consulting Pvt Ltd chairman Nagaraj Meda said that since 2005, Indian palm oil consumption had grown at a CAGR (compound annual growth rate) of 16%, compared with the cumulative vegetable oil demand surge of 2.9%.
Nagaraj said that India accounted for 29% or 4.58 million tonnes of the world’s 15.8 million tonnes of incremental consumption of palm oil from 2005 to 2011.
“The palm oil industry should thank Indian policy makers for opening a great market, as there was a constructive policy change of zero duty on CPO (crude palm oil) and just 7.5% on olein in 2008,” he said.