Saturday, April 12, 2008, Rabi-ul-Sani 5,1429    

Indian importers default on palm oil contracts

Mumbai—Even as the stand-off between select big boys of the edible oil trade (major sellers) and a large number of small buyers in the local markets of Mumbai, Kolkata and South India continues, comes the news of large-scale default by Indian importers following a decline in international prices.

Importers who had purchased crude palm oil at prices as high as $1,400 a tonne CIF sometime in February are wriggling out of the obligation as the market has undergone a sharp correction of up to $300 a tonne. One of the reasons attributable to purchases at such fancy prices was the expectation of a continuing bull run; but that was not to be. According to a trade estimate, crude palm oil contracts totalling 250,000 tonnes are in a state of suspended animation. Overseas suppliers are livid that importers here are trying to opt out of the obligation. Most of the contracts are with suppliers from Indonesia. The default is sure to damage the fair image of India, according to market observers. Some shipments from Indonesia destined for India have reportedly been diverted to Pakistan because Indian importers have refused to meet their obligation.

Indian importers are already carrying sizeable stocks that were accumulated when prices were high. With a sharp fall in domestic prices as a result of softening international rates and waiver of duty by the Indian government, the importers find themselves in an awkward position.

The domestic offtake has also turned sluggish because of what is seen as the intransigent attitude of some large operators who are unwilling to amicably settle commitments that were made before the duty revision took place. Reports from different parts of the country point to one or two major players with high stakes pressurising local dealers to take delivery of high priced goods even when the market has actually fallen. “We are in no position to accede to the dadagiri (bullying tactics) of big boys,” lamented a local dealer on the condition of anonymity.—APP