Edible oil refineries slash operating capacity by half

Edible oil refineries have reduced operating capacity to 40-50 per cent over non-availability of raw materials, following a delay in clearance of imported crude oil consignments and disruption in oilseeds supply as spot Agricultural Produce Market Committee (APMCS) closed as part of the nationwide lockdown announced to prevent the spread of the coronavirus disease (Covid-19).

This has resulted in volatility in prices of both oilseeds and oils in the futures markets. Prices of all edible oilseeds and oils remained highly volatile depending on their fundamentals, with soybean and mustard seed prices moving in very wide ranges in the past two weeks.

Another issue was of import clearance that hindered crude oil supplies that refineries were waiting for.

India’s total consumption of edible oils is about 23 million tonnes (MT) of which domestic production stands at about 7.5 MT and the deficit is met through imports. In the past few weeks, a large quantity of imported crude edible oil was lying at Kandla and Mundra ports awaiting clearance.

The decline in operating capacity comes at a time when harvest of mustard seeds was expected to have been in full swing. However, farmers have been left in the lurch because of the lockdown.

As a result, farmers across major mustard seed growing states including Rajasthan, Gujarat and Madhya Pradesh, have delayed harvest. With hailstorms continuing to disrupt at regular intervals, the crop is expected to have been damaged. Under normal circumstances, India’s dependence on raw edible oil import, which current stands at around 65 per cent, could have been reduced.

“Currently, edible oil units are operating with 40-50 per cent of their installed capacity. Demand has shifted to household consumption (small packs) because of the lockdown. Hence, supply of raw material / packing material to these units should be resolved. Needless to say, without stores and chemicals required for refining, apart from packing material, factories cannot function and maintain supply chain,” said Atul Chaturvedi, president of the Solvent Extractors’ Association (SEA), the premier industry body representing edible oilseeds and oils sector in India.

Soybean futures have recovered nearly ~700 in less than two weeks amid panic buying.