Cheap edible oil sales bleed PSUs

Written by fe Bureaus | New Delhi | Updated: Jan 27 2010, 03:29am hrs
Even as the central government is considering a proposal to hike the subsidy on distribution of cheap edible oil from the current level of Rs 15 per kg, the state-run public sector undertakings(PSUs), which had imported oil on behalf of the government, are incurring significant losses from their sale.

Till middle of December, the PSUs have incurred an average loss of around Rs 32,064 on every tonne of soyaoil sold and Rs 33,346 on every tonne of RBD palmolein sold.

The PSUs namely, STC, PEC, MMTC along with Nafed which have been importing edible oils on behalf of the government have been asked to furnish weekly reports pertaining to losses incurred by them.

Till middle of December around 96,652 tonne of edible oil has been disposed off by the PSU.

The scheme for subsidised distribution of edible oils, which was started last year, has now been extended up to October 31, 2010.

The government has also authorised Nafed and NCCF to distribute the subsidised edible oil because of poor response from states for such distribution.

The subsidised edible oil sale scheme provides for distribution of 1 million tonne of imported edible oils at a subsidy of Rs 15 per kg through state governments public distribution system (PDS).

The edible oil will be provided at the rate of 1 kg per ration card per month.

State-owned agencies like PEC, MMTC, STC and Nafed have been entrusted with the job of import, refining, packing and distribution of subsidised edible oils to the states.

Though the scheme was launched with much fanfare, but many states didnt show any interest in the distribution as by then retail edible oil prices had dropped considerably.

Out of the 12 million tonne of edible oil consumption in the country, more than 5.5 million tonne is imported. The country imports around 2 million tonne of soyabean oil from Argentina and Brazil, while about 3.5 million tonne of palm oil is imported annually from Malyasia and Indonesia .

Some experts still believe that the success of the scheme despite best efforts still remains doubtful as edible oil prices are still low.

However, noted edible oil market analyst Dorab Mistry feels that edible oil prices in India should start rising by middle of 2010 because of expected decline in palm oil production in Malaysia, the worlds biggest producer of oil.

According to Mistry, Malaysias production would drastically fall next year because of end of the high cycle where palm plantation needs to be replanted and El Nino phenomenon.

He said with the decline in production in Malaysia, palm oil prices are also expected to rise to around 2,800 to 3,000 ringgits by March, because of low stocks with main producers and strong demand from India, one of the worlds biggest consumers of edible oils.