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Will The Indian Festival Season Usher In Cheer?

The COVID-19 curve seems to have flattened and is now showing a welcome sign of retreating as the number of new cases shows a declining trend. Mirroring this good news is the country’s trade which is improving. But the country still has to tread with caution.

The lockdown, first imposed in March 2020, saw the nation in an almost freeze mode. With the gradual unlocking, the country is limping towards normalcy. Figures have improved since the March-June period but the September numbers are still low when compared to that of September 2019.  The merchandise exports in September rose to 6% on year to year and imports have reportedly declined during September 2020 vis-a-vis September 2019. This fall in September imports has led to a reduction in September-end port stocks of vegetable oils. This could raise the prospect of higher imports in the last quarter of the calendar year.

The festival season is on us. This could result in an improvement in demand compared to the last few months for edible oils. The total imports of vegetable oils in the period January to September 2020 decreased by 16% from 11.83 Million MT to 9.9 Million MT last year. Palm Oil Product imports also saw negative growth of 31% from 7.6 Million MT to 5.3 Million MT. Malaysian Palm Oil imports decreased from 4 Million MT in the same period last year to 1.6 MMT in the current year, depicting a negative growth of 60%. MPO share in the palm oil import basket fell to 30% whereas last year during the same period it was 52%.

The biggest impact of the lockdown was on the HoReCa establishments. It is estimated that close to 90% of this segment has been scalded by the pandemic. A big chunk of palm oil imports was being consumed by the HoReCa segment.  As consumption has plummeted, the need for palm oil imports also dipped. Parallel to the dip in the HoReCa segment is the increased consumption by households. The favoured cooking medium at household levels are soft oils. Although Palm Oil Products imports picked up, it was still outshone by soft oil imports.

Palm oil share in the import basket decreased to 52% compared to 64% last year during the same period, but the demand has increased as compared to August due to opening up of restaurants and hotels.

The present total market share of Malaysian Palm Oil in Indian import basket is 16.04%. Last year it was more than double at 33.82%, on the back of the tremdendous increase in RBD imports.

In the foreseeable future, the drop in palm oil market share is likely to persist. This is mainly due to the slow recovery in the HoReCa sector. The changes in placing refined oils in ‘Restricted’ category and the suspension of import licenses is having its say in the market dynamics.  To regain market share, Malaysia will have to maintain price competitiveness while continuing its efforts to educate Indian masses both on nutrition and environmental front.

The pandemic has forced countries to have a relook at their overall trading patterns. The need for not being overly dependent on other countries is acutely felt. In line with this philosophy, the political dispensation has given a clarion call for an Atma Nirbhar Bharat (Self- Reliant India). To propel this initiative, myriad schemes and projects have been launched. The aim is to make India increasingly self-sufficient and not depend on the vagaries of the external geo-political or social headwinds.

Presently, India imports around 65% of its vegetable oils requirement. Plans are on the anvil to see a steep rise in domestic production to offset the need for oil imports. Some of these plans are long gestation projects. Slowly and steadily the country should be seeing the percentage of imports decreasing. Over a period of time, increased production of edible oils should see the country’s dependence on imports lessen.

It is hoped the festival season will usher in a change for the better.

Prepared by  Bhavna Shah

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