Something went wrong somewhere this year. Disappointed producers say that the existing glut in the domestic edible oils market was responsible for pushing down vanaspati prices. The industry is of the unanimous view that the situation would improve only if the government increased the import duty on edible oils further so that there was a check on imports.

Although profits of the producers have taken a beating, some brave-hearts have not lost hope and are looking forward to an upward movement in prices, even if a slight one, during `Dussehra' and `Diwali'.

According to KC Sood of United Vanaspati Ltd, a Chandigarh-based company, "Producers are banking on the month of October to do good business. We are certainly hoping that prices would go up in that month."

While agreeing with Sood that prices may take an upturn, Vanaspati Manufacturers' Association chief executive SK Chadha said that the increase would be very small. "Earlier, prices used to go up by 20 per cent to 25 per cent during festival season. Now, prices increase by just 5 per cent to 10 per cent."

Chadha said that due to an excessive supply of edible oils in the market, the difference between peak season and slack season prices had narrowed. "The market is now dictated by international prices. As prices of RBD palm oil has gone down in the global market, there has been no increase in vanaspati prices in August despite the festival of Raksha Bandhan when sweet consumption in the country increases manifold."

Price of RBD palm oil, the chief competitor of domestic vanaspati, dropped to $290 per tonne in August from $328 per tonne in the beginning of the year.Vanaspati prices, which stood at Rs 650 per 15 kg in Jan 1999, have fallen continuously since then. After reaching a low of Rs 425 per 15 kg in June 2000, prices improved slightly the following month to Rs 480 per 15 kg. However, in August, prices fell to Rs 450 per kg.

According to producers, the recent hike in import duties had not been able to check imports as global prices had gone down sharply because of high oil seed production worldwide. The only way to stop domestic prices from crashing would be to increase duties further.

As the World Trade Organisation (WTO) bound rate for edible oil was as high as 300 per cent, producers said that the government could easily increase the present duty of 44 per cent some more without fearing sanctions.Another long-term problem of the vanaspati industry has been the flow of duty free and quantity free imports of vanaspati from Nepal, permitted by the Indo-Nepal Trade Treaty signed between the two countries. The Indian government had had a discussion with the Nepalese Government on the surge in imports of Vanaspati from Nepal, without any satisfactory outcome.Producers said that the increase in export tax on vanaspati from 0.5 per cent to 5 per cent imposed by the Nepalese Government did not have any impact on the quantum of imports from the country.

Associations have suggested to the government that it should impose a minimum 16.5 per cent duty on vanaspati imports from Nepal. It should also shift vanaspati into the negative list of the items to be imported from Nepal.

Producers believe that unless the Government takes steps to solve their problems, all attempts by the industry to survive and thrive will fail.