Edible oil industry in the India, which is hugely driven by import of edible oils,

registered revenues of INR ~ billion in FY2012. With an increase in consumption of

edible oils in the country, the revenue of edible oils had inclined by 30.8%
compared to FY2011. Each segment in the edible oil industry is subject to a gamut
of different factors such as price hikes and change in government policies play an
important role in determining their respective revenues. The edible oil industry in
the India has grown at a CAGR of 13.1% from INR 638.4 billion in FY2009 to INR ~
billion in FY2014. The competition in India edible oil market is highly fragmented
owing to the presence of a large number of organized as well as local and
unorganized players. The major players are Cargill, Adani Wilmar, Ruchi Soya,
Agrotech Foods, and others.

India is the second-largest producer of Rice bran oil after China and the country has
the potential to produce more than 1.4 million tonnes of rice bran oil. Rice Bran Oil
market in India is still at its nascent stage, but the segment has showcased
immense growth in the past few years. In FY2012, the market for Rice Bran Oil in
India grew at a sizeable growth rate of 14.0%. Adani Wilmar is the leading player in
the Rice Bran oil segment. A large proportion of the rice bran oil market is
dominated by regional and local players

Sunflower oil market in India has showcased a promising growth in revenues during
the past few years. The sunflower oil market revenues during the period FY2009-
FY2014 has surged at a healthy CAGR of 3.2%. The market for Sunflower oil in India
has been dominated by Kauleeshwari. Ruchi Soya, Cargill, Adani Wilmar and other
players such as Rasoya proteins, Kaneriya Oil industries, local and regional players
as well as imported brands also command a substantial proportion in the overall
market.

Blended Oil market in India has showcased a healthy and steady growth during the
span of last five years from FY2009-FY2014. The market for Blended Oil in India
has been largely subjugated by organized players which has accounted for major
share in the overall market. The organized market which incorporates branded
players such as Agrotech Foods, Marico and Adani Wilmar also has a strong regional
dominance in the country.

The edible oil market is expected to be dominated by various national and

multinational players due to the increasing import dependence of the country in the
near future. Rice bran and blended oil market are expected to be the fastest
growing categories in the entire edible oil segment with Oils such as Mustard,
Sunflower, Groundnut and Cottonseed tend to remain region specific in the near
future with a moderate fluctuation in their prices
Indian edible oil industry is the worlds fourth-largest industry after USA, China and Brazil and
accounts for around 9% of the worlds oil seed production. It is highly fragmented with extreme
variation in the consumption pattern of Indian consumers of edible oil. The Indian edible oil
industry continues to be underpenetrated and thereby holds immense business opportunities.
Vegetable oil consumption has increased due to rise in overall household income, surging retail
sector, increasing health awareness, growing population and increasing demand. In India,
oilseeds are grown in nearly 26-27 million hectares. The productivity is however very low in
comparison with the world average. The consumption growth is rising by nearly 5.5 to 6.0% per
annum. Palm Oil is consumed the most by lower income category of Indian society.
Consumption of Palm oil in India is now nearly 45% of the total oil consumption followed by
Soybean oil and Rapeseed oil. Also the Indian edible oil demand is quiet elastic and does reduce
or increase to an extent with change in prices. Import of edible oil has increased nearly 2.5 times
in last 8 years. The central government allowed 100% FDI in oil palm plantations which is one
of the important steps in helping fill the gap of edible oil deficit in India. The alarming declines
of Indian oilseeds production and crushing are going along with booming import demand for
vegetable oils, have brought oilmeal exports from India almost to a standstill.

Export of Oil meals

The export of oilmeals during January, 2016 is lowest ever reported export of 17,243
tons, down by 91%, compared to 185,654 tons in January, 2015. The overall export of
oilmeals during April, 2015 to January, 2016 reduced to half (51%) compared to last
year at 1,005,085 tons against 2,047,937 tons during the same period of last year and
3,646,095 tons in 2013-14.

Soybean crushing declined due to continuous disparity and high price of domestic
market affecting overall domestic availability of both oils and meals. The capacity
utilization is at the lowest. Industry is passing through very tough time and many plants
are close down or operating at very low capacity due to disparity in crushing and export.
Rapeseed meal export is also reduced to 1/3rd of last year. The export of soybean meal
is at a historical low during current year and reported just 69,263 tons during the first ten
months of the financial year 2015-16 compared to 549,162 tons in the previous year
2014-15 and 2,375,231 tons during the same period of 2013-14.
Import of Vegetable Oil

The import of vegetable oils during January, 2016 stood at 1,258,054 tons compared to
1,095,466 tons in January, 2015, consisting of 1,255,054 tons of edible oils and 3,000
tons of non-edible oils i.e. up by 15%. The overall import of vegetable oils during first
quarter of the current oil year 2015-16, November 15 - January 16 is reported at
4,014,101 tons compared to 3,427,276 tons i.e. up by 17%. During November 15 -
January 16, import of refined oil (RBD Palmolein) jumped to 611,256 tons from 173,113
tons in the same period of last year, while Import of crude oil marginally increased to
3,383,879 tons from 3,182,568 tons during the same period of last year. During
November 15 - January16, Palm Oil import has marginally increased to 2,350,063 tons
from 2,293,994 tons during the same period of last year, however, Soft Oils import
increased to 1,645,072 tons from 1,061,687 tons last year. The share of soft oils import
increased to 41% from 32% last year, while share of palm oil products down to 59%
from 68%. The import of Non-edible oils during November 15 - January 16 is reported
at 18,966 tons only compared to 71,595 tons during the same period last year. i.e. down
by 74%.
Major Importers of Oil meals

South Korea is a major importer from India. During April 15 - January 16, oilmeal
export to South Korea is reported at 616,691 tons compared to 730,571 tons; consisting
264,180 tons of rapeseed meal , 351,606 tons of castor meal and 905 tons of soybean
meal. Vietnam imported 218,728 tons compared to 269,935 tons last year; consisting of
2,587 tons of rapeseed meal, 480 tons of soybean meal and 215,661 tons of Deoiled
rice bran extraction. Thailand imported 27,631 tons compared to 189,026 tons;
consisting 11,646 tons of rapeseed meal, 10,581 tons of soybean meal and 5,404 tons
of Deoiled rice bran extractions. Taiwan imported 34,804 tons compared to 61,978 tons
last year; consisting of 18,469 tons of rapeseed meal, 15,098 tons of castor meal, 400
tons of groundnut meal and 837 tons of soybean meal. Oman imported 24,947 tons
compared to 19,239 tons last year consisting of 12,463 tons of soybean meal, 11,984
tons of Deoiled Rice Bran and small quantity of 500 tons of castor meal.
Budget Expectations

The industry body Solvent Extractors Association of India has asked for increasing
customs duty on edible oil imports in order to safeguard farmers interest. To fulfill the
domestic requirements of raw material, the association suggested that imports of
oilseeds, oilcakes and rice bran should be encouraged by reducing the import duty to a
reasonable level. It suggested some measures, such as importing oilseeds at lower
duty, importing oilcakes and rice bran at nil duty, increasing overall availability of raw
material and exporting all edible oils in bulk without MEP (Minimum Export Price).

The association suggested that in order to encourage FDI in oil palm plantation, the
government should declare oil palm as a plantation crop and exempt the 2 million
hectares identified as suitable for oil palm plantation from the Land Ceiling Act.

The Oil Palm Developers and Processors Association (OPDPA) has recommended a
separate import policy for the palm oil industry. It wants the import duty on palm oil to be
increased substantially from 12.5 percent now to boost domestic production.

The association wants the government to allocate Rs 10,000 crore for the development
of the palm oil industry to promote domestic cultivation. The association has also
demanded efficient implementation of Market Intervention Scheme (MIS) to bail out the
farmers when faced with crop losses incurred due to market fluctuations.

The association is also advocating that in order to help increase the area of palm
cultivation, the government should increase the input subsidy to Rs 40,000 for four
years and raise the aid towards the planting material to Rs 20,000. If these incentives
are extended, the crop acreage may increase by 20,000-40,000 hectares.

Outlook

India has been an importer of edible oil for last many years because of a mismatch
between demand and domestic production. The palm cultivation has not taken off in the
country on expected lines. Though, the per-capita consumption of edible oils is still a lot
below threshold level of consumption. High growth in income levels, increasing trend in
spending & better living standards may push the growth. Of late, consumption of edible
oil in the country has started growing at around five percent a year. It, coupled with the
limited availability of oil seeds and shifting of acreage to other crops, has resulted in the
widening of supply-demand gap in the domestic market. The domestic production of
oilseeds has been declining in the last two years as farmers are no longer interested in
growing the crop which has become un-remunerative. The shortage of raw material and
capacity utilization have further devoid the industry of gaining production and
productivity, thus making the industry less competitive in the global market. Provided the
positive macro and demographic fundamentals, the edible oil market has a favorable
demand growth outlook over the medium-to-long term. A lot will however depend upon
the long-term actions of the government for the growth and development of the sector.
The increase of import duty on edible oil and provisions for extra incentives in the
coming budget will further provide impetus to the industry.