They said Indian palm olein oil imports, which in past years accounted for 70 per cent of total edible oil imports, were expected to fall sharply in the current oil season as soft oil imports were working out to be relatively cheaper.

"In the past years imports of palm olein and soft oils were in the ratio 70:30," said BV Mehta, executive director of the Solvent Extractors' Association of India (SEAI). "This year, the ratio is turning out to be 45:55."

Traders said palm olein oil imports from Malaysia cost Indian importers about $525 per tonne at Indian ports, while imports of crude soft oils cost between $442 and $426 a tonne at Indian ports. After adding $50 for refining, it would still cost less than $500 a tonne.

"The net effect is that, even if we refine the soft oils here, it is working out to be much cheaper," Mehta said.

Trade officials said low global prices and expectations of a bumper summer oilseeds crop were expected to keep domestic oilseeds prices depressed for at least the next two months. "Prices are going down and down," said sources.

Traders said palm olein in domestic markets was quoted at Rs 27,500 ($647) a tonne, down from Rs 31,500 a week ago. Agriculture minister Sompal expects the 1998/99 (July-June) oilseeds output to exceed 25 million tonnes, compared with 22.0 million tonnes in the previous year.

"The summer crop is turning out to be very good," said Pradeep N Kotak, chairman of Indian Oilseeds and Produce Exporters Association. "Harvesting is going on in full flow and market arrivals are picking up," he added.

Malaysian palm olein prices hit an 18-month low earlier this week after a slew of contract defaults by major international buyers. But Indian traders said major defaults were unlikely. Across-the-board surcharge on imports, which would increase the import duty to 16.5 per cent from 15 per cent previously.

Traders said the duty increase was too small to stop surging imports of edible oils, a situation which could hit local farmers. "With international prices going down and down, the increase will hardly have an impact on stopping imports," feel sources.

SEAI said India imported about 8,00,000 tonnes of edible oils between November 1998 and January 1999, compared with 2,50,000 tonnes in the same period a year earlier.

The surge in imports was largely triggered by declining global prices amid a devaluation of the Brazilian currency, a bumper international crop and cancellations of import orders by some countries.

February figures have not been compiled but traders expect edible oil imports of about 1,50,000 tonnes in February, and the same amount in March.