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Duty cuts may reign in palm oil prices
Our Bureau
Date of posting: 11-06-07
      The recent surge of palm oil prices to record highs globally, has forced the Indian government to cut the custom duties to control the prices of palm oil. As the other edible oils prices are also shooting up, users have little alternatives but to pay up, according to a senior executive of a leading export house.

      India’s demand for palm may drop a bit, but only in the near term. Palm oil prices in Malaysia, the benchmark for the commodity in what is the world’s largest producer, have reached record highs this week on hopes that competitor Indonesia will raise export taxes and due to concerns over depleting stocks. A remark by a senior food ministry official that New Delhi, battling ballooning inflation, was planning a third round of duty cuts on vegetable oils in 2007 added fuel to futures prices.

      India, the world’s second largest buyer after China, imports around five million tones of vegetable oils annually, just over half of which is palm oil. Analysts said that some importers might hold back purchases in the hope that the market could see a correction after the strong rally, but won’t cancel any deals. I do not see people switching to alternative oils. Alternative oils are also getting expensive, Chaturvedi added.

      Soya oil on the Chicago Board of Trade is also benefiting from surging demand for vegetable oils, and is currently hovering near a 23-year high. The Centre in April cut the palm oil import duty by 10 percentage points to 50 per cent, to help counter high international prices. The current import duty on soya oil is 45 per cent.

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