This inevitably is feared to lead to a payment crisis on the Malaysian palmoil markets, percolating later on to the local markets as well.On Friday, the palmoil prices in Malaysian market is said to have plunged to around $200 per tn, which when converted into Indian rupees (including import duties and other levies) works out to around Rs 10-12 per kg.From a high of over $700 per tn and Rs 440 per 10 kg in the local markets couple of years ago, the current fall is the steepest in the palmolein history, traders say.

``The current palmolein prices is almost equal to a litre of plain water'', said the Bombay Oilseeds and Oils Exchange (BOOE) president Mr Mangalbhai Shah. ``This situation is expected to force the Centre to announce stiffer measures over the next few days to curb flooding imports''.

It was only on November 21 last that the Government had hiked the import duty on various edible oils, including palmolein. Contrary to expectation of price hike after the import duty hike, the prices have been sliding and since then, these have fallen over 20 per cent putting extreme pressure on importers and buyers of the product.

``It is high time that the Government realises that Malaysian producers and exporters are dumping their goods on to the Indian markets and takes immediate corrective steps to stop this'', Mr Shah said.

In Ahmedabad and Mumbai both, panic has gripped the market with the price fall, even as majority of the leading importers are finding it extremely difficult to dispose off their goods, imported at a higher prices and higher import duties in November.

According to a trader in Ahmedabad ``Even as traders are facing liquidity crunch, a leading trader in New Delhi is said to be stuck with a large inventory of palmoil adding fuel to the fire of payment crisis''.

At such times, is a normal parctice to backout of commitments leading to unhealthy trade and reluctance to fulfill commitments.

Barely 45 days after the hike in import duty on various edible oils, vegoil traders and importers have once again begun debating whether and to what extent will there be another round of duty hike, to curb the overflowing import of cheap RBD palmolein from Malaysia and Indonesia.

Continued import of cheap crude and RBD palmolein has made it easier to adulterate and therefore, disturb the local vegoils prices and markets - with groundnut oil in the western markets, with mustard oil in the north eastern markets and coconut oil in the southern region.

This has raised concerns, doubts and fears among the players whether the Centre will announce more tougher steps, including introduction of minimum support prices (MSP) for vegoil and higher import duty, to curb rising imports.

Despite the duty hike on November 21, the palmoil prices in both the local and the Malaysian markets have plunged on Thursday evening, to around Rs 185-87 per 10 kg and $200 per tonne - some 20 per cent from over Rs 218 on and $250 per tn on November 22 and 23 last. In Malaysia (palmolein's main exporter), traders and exporters have been cutting prices almost every day, pushing the prices down further on the local markets.

In early November last, the prices for January-February and March 2001 deliveries were quoted at around $267.50. Currently, the prices have plunged over 25 per cent, sending shivers down the spine of all those players who were then bullish on the prices, and had transacted huge quantities of the commodity.

(Biren Vakil works with e-mecklai.com. The views expressed here are his own)