The Malaysian export price to India touched a low of $245 per tonne in the middle of last week, at all the major edible oil wholesale trading centres including Mumbai, Chennai, Nagapattinam, Kakinada, Cochin, Mangalore and Kandla. The price was $260 per tonne before the duty hike was made public.

However, because of floods in certain palm producing areas of Malaysia, the price went upto $250 per tonne on Thursday. This has kept the buyers away from the market as they are waiting for further drop in prices. At the same time resellers, who had bought their stocks prior to duty increase are selling at around Rs 215 per 10 kg, as against the post-duty price of Rs 220 in the market.

The local market price has reduced marginally from Rs 225 per 10 kg on Tuesday to Rs 220 per 10 kg on Thursday. According to sources in the trade, prices in the domestic market are not expected to fall below Rs 200 per 10 kg. Also, this time traders have not made forward bookings before the duty hike, as they had done earlier expecting prices to shoot up after the duty increase and had burnt their fingers.

Traders are generally upbeat about the duty hike, as unlike in the past, Malaysia is not expected to drop prices to neutralise the effect of the duty hike. The Malaysian prices are expected to go down to approximately $235 per tonne as it has a huge stock inventory, while its exports are expected to fall in December.

While the closing stock for November is expected to be as high as 15 lakh tonne, Malaysia's exports are expected to fall to around eight lakh per tonne from the 10 lakh per tonne in October. However, as Malaysia's production is likely to fall to around eight or nine lakh tonne in December, from around 12 lakh tonne in November, it is not expected to bring down its export price much.

Also, Malaysia is not expected to effect a price drop equivalent to the duty hike this time, as the increase is too steep from 35 per cent to 65 per cent, say sources in the trade. The government had revised the basic import duty for palmolein twice in the recent past - 15 to 25 per cent on December 30, 1999 and 25 to 35 per cent on June 12, 2000.

However on earlier occasions, Malaysia, the main exporter of palmolein to India, introduced a corresponding drop in its prices, neutralising the duty hike. But even if there's no drop in prices our imports are not expected to fall because of the poor domestic oilseeds production. So far, between November 1999 and October 2000, around 45.3 lakh tonne of edible oil has been imported by India and the figure is expected to grow to around 49 lakh tonne in the next oil year (November 2000 to October 2001).

The edible oil industry in India is estimated at around Rs 15,000 crore. And the domestic production of oilseeds is expected to drop from 216.5 lakh tonne in 1999 to 188.9 lakh tonne in 2000. As the domestic oilseeds (groundnuts, soya, mustard, rapeseed, coconut, til, sunflower and mustard) produce is expected to fall short of the projections of 121 lakh tonne, oil imports will have to increase to meet the shortfall.