Edible Oil Market in India
Edible Oil Market in India
BACKGROUND
Edible oils constitute an important component of food expenditure in Indian households. Historically, India has been a major importer of edible oils with almost 30-40% of its requirements being imported till 1980s. In 1986, the Government of India established the Technology Mission on Oilseeds and Pulses (TMOP) in order to enhance the production of oilseeds in the country. The TMOP launched special initiatives on several critical fronts such as improvement of oilseed production and processing technology; additional support to oilseed farmers and processors besides enhanced customs duty on the import of edible oils. Consequently, there was a significant increase in oilseeds area, production, and yields until the late-1990s. However, in order to fulfill its obligations towards various international trade agreements and also meet the increasing demand-supply deficits, India began to reduce import restrictions on edible oils in the late 1990s; and it was gradually brought under Open General License. This led to a significant slump in the domestic oil seeds market, as edible oil prices fell sharply in line with the low international prices prevailing at that time. Subsequently, the duty structure was modified so as to maintain a duty differential between crude and refined varieties in order to protect the domestic industry. Nevertheless, due to high import dependence, domestic edible oil prices remain highly correlated to international edible oil price movement, and this has resulted in volatility in the key credit metrics of rated edible oil companies. At the same time, edible oil companies with benefits of large-scale integrated operations, multi-product offerings and recognizable branded presence in retail markets have fared better as compared to small/medium-scale domestic oilseed crushers. The demand for edible oils in India has shown a steady growth at a CAGR of 4.43% over the period from 2001 to 2011. The growth
BACKGROUND
Edible oils constitute an important component of food expenditure in Indian households. Historically, India has been a major importer of edible oils with almost 30-40% of its requirements being imported till 1980s. In 1986, the Government of India established the Technology Mission on Oilseeds and Pulses (TMOP) in order to enhance the production of oilseeds in the country. The TMOP launched special initiatives on several critical fronts such as improvement of oilseed production and processing technology; additional support to oilseed farmers and processors besides enhanced customs duty on the import of edible oils. Consequently, there was a significant increase in oilseeds area, production, and yields until the late-1990s. However, in order to fulfill its obligations towards various international trade agreements and also meet the increasing demand-supply deficits, India began to reduce import restrictions on edible oils in the late 1990s; and it was gradually brought under Open General License. This led to a significant slump in the domestic oil seeds market, as edible oil prices fell sharply in line with the low international prices prevailing at that time. Subsequently, the duty structure was modified so as to maintain a duty differential between crude and refined varieties in order to protect the domestic industry. Nevertheless, due to high import dependence, domestic edible oil prices remain highly correlated to international edible oil price movement, and this has resulted in volatility in the key credit metrics of rated edible oil companies. At the same time, edible oil companies with benefits of large-scale integrated operations, multi-product offerings and recognizable branded presence in retail markets have fared better as compared to small/medium-scale domestic oilseed crushers. The demand for edible oils in India has shown a steady growth at a CAGR of 4.43% over the period from 2001 to 2011. The growth