Presentation on

Indias Short and Long term Demand Supply g pp y& Import of Vegetable Oils with Special Reference to

Indonesian Export Policy and its Impact on Import by India

Byy

Dr. B. V. Mehta, Executive Director

The Solvent Extractors Association of India

AtAt

10th Indonesian Palm Oil Conference 201426th 28th November, 2014

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INDIA

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India Largest Importer of Palm Oil from Indonesiafrom Indonesia

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BOLLYWOOD

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Indian Economy

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Indian Macro-economic Overview

India a fast growing significant economyin spite of global slowdownin spite of global slowdown

Strong Macro-economic fundamentals

GDP Value: Over US$ 2.31 Trillion (Tn)

Purchasing Power Parity (PPP): US$ 5.12 Tn

Forex Reserve: US$ 314 Bn Forex Reserve: US$ 314 Bn

FDI Flow US$ 28 Bn (2013)

Savings Rate 30.2% of GDP (2012-13),includes Household Savings Rate of 22.1%

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India's Overall GDP Growth

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%

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8.57.5

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Average GDP growth in last five years (FY08-09 to FY12-13) was 7.1% For FY13-14, the GDP growth is forecasted at 4.9%

Source : CMIE

For FY13 14, the GDP growth is forecasted at 4.9% GDP is expected to grow at 6 to 7.5% in next 3 years

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Indian Agricultural Scenario

I di A i l S iIndian Agriculture Scenario

India is well connected with cellular phone having 950 Million users and with the talk time rate cheapest in the world.

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Agriculture Sector GDP Growth )

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Agriculture Sector growth depends heavily on monsoon performance For 2013-14, growth is reported at 4.7% compared to 1.4% in previous year

Source : CMIE 9

Indian Oilseed Sector

Demand - Supplypp y

andand

Import of Vegetable Oils

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Oilseed Sector 2013-14 Area Under Oilseed Cultivation 26-27 Mn. Ha. Average yield 1000 kg

Output of 9 cultivated Oilseeds 26.7 MnT Output of Cottonseed & Copra 11 9 MnT Output of Cottonseed & Copra 11.9 MnT

Total 38.6 MnT

Production of Oilcake/meal 25 26 MnT Production of Oilcake/meal 25-26 MnT Production of Vegetable Oils 8.20 MnT Demand of Veg. Oils (Edible) 18.3 MnT Import of Veg. Oil 2012-13 (Nov-Oct) (Edible) 10.4 MnT

Per Capita consumption (2013) 14 0 kg Per Capita consumption (2013) 14.0 kg

Per capita consumption is rising by 3 to 4% per annum

MnT = Million Tonnes 11

Indian Oilseeds Production (2008-09 to 2013-14)

Crop 08-09 09-10 10-11 11-12 12-13 13-14Major Oilseeds

(2008 09 to 2013 14)Qty : Mn T

jGroundnut 5.92 5.12 5.84 6.02 4.33 6.48Rape/Mustard 6.70 6.03 7.10 6.03 6.85 7.38S b 8 90 8 50 9 50 10 65 10 70 10 23Soybean 8.90 8.50 9.50 10.65 10.70 10.23Sesamum 0.58 0.76 0.66 0.76 0.60 0.65Sunflower 1.15 0.99 0.66 0.62 0.62 0.58. 5 0.99 0.66 0.6 0.6 0.58Safflower 0.16 0.15 0.14 0.10 0.09 0.10Niger 0.04 0.08 0.10 0.09 0.08 0.07Linseed 0.13 0.16 0.16 0.13 0.12 0.12Castor 1.02 0.97 1.19 1.62 1.35 1.12Sub-Total 24.65 22.76 25.44 26.02 24.73 26.73Sub Total 24.65 22.76 25.44 26.02 24.73 26.73OthersCottonseed 8.93 9.15 10.07 10.94 10.23 11.16C 0 65 0 66 0 65 0 65 0 60 0 70Copra 0.65 0.66 0.65 0.65 0.60 0.70Grand Total 34.23 32.57 36.16 37.61 35.56 38.59Source : COOIT / SEA 12

Indian Oilseeds Productivity Very LowIn Comparison With World AverageIn Comparison With World Average

Groundnut - 64% of World Average

Soybean - 43% of World Average

Mustardseed - 53% of World Average

Sunflower 39% of World Average Sunflower - 39% of World Average

Sesameseed - 72% of World AverageSesameseed 72% of World Average

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World & India Production of Oils & Fats 2013 14Oils & Fats 2013-14

Qty : Mn T

Oil & Fats World India Palm Oil 58.46 0.13

Palm OilOther Oils Soya Oil 43.78 1.39Rape Oil 25.69 2.53

RBO

Palm Oil

Cotton Seed RBO

GN

& Fats

Sun Oil 15.64 0.18Cottonseed Oil 4.86 1.08G d t Oil 4 11 0 58

RBO

Soya Oil

Oil

Sun Oil

Cotton Seed

Groundnut Oil 4.11 0.58Rice Bran Oil 1.20 0.93Other Oils & Fats 42 69 2 93

Rape Oil

Other Oils & Fats 42.69 2.93TOTAL 196.43 9.75WORLD

Major Vegetable oils produced in India are Rapeseed Oil, Soybean oil,

Source: Oilworld 2014 & SEA Data Bank for India

j g p p , y ,Cottonseed Oil, Rice Bran Oil & Groundnut Oil

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Consumption

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Per Capita (kg) Disappearance of Oils and Fats in Selected Countries and World

Country 2013-14 2012-13 2011-12 2010-11 2009-10 2008-09

in Selected Countries and World

EU-28 60.5 59.3 58.7 59.6 61.1 59.4U.S.A. 57.7 57.4 56.0 52.6 50.2 51.0Argentina 74.0 69.1 90.8 78.5 65.6 46.4China 25.9 25.4 24.7 24.1 23.5 22.6India 16 0 15 6 15 1 14 7 14 4 14 1India 16.0 15.6 15.1 14.7 14.4 14.1Indonesia 42.6 37.3 33.1 29.4 25.6 23.4

Thailand 31.5 30.5 29.4 27.3 24.6 23.0

Taiwan 34.1 33.1 34.5 34.6 33.7 32.3Pakistan 21.8 21.7 21.7 21.6 21.8 21.7Bangladesh 11.9 11.6 11.2 10.3 9.7 9.2

World 27.0 26.4 25.9 25.2 24.6 23.8

Source : Oil World 2014

Number shown includes consumption of oils and fats for Bioenergy andNon Edible purpose

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Consumption Pattern Consumption trends in India are marked, not just by rising

overall consumption, but by changing the patterns ofp , y g g pconsumption as well

In the early 1970s, almost all vegetable oils consumed in Indiacomprised Groundnut, Rapeseed & Cottonseed Oil. Palm,Soybean & Sunflower Oil accounted for just 4%y j

However over the years, Palm Oil and Soybean Oil havebecome the leading Edible Oil consumed because thedomestic production of Groundnut, Rapeseed & CottonseedOil have not been able to keep pace with the increasingOil have not been able to keep pace with the increasingdemand

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Change in Edible Oil Consumption in India2001-02 to 2012-132001 02 to 2012 13

2001-02 2012-13Qty : 000 T

Particulars2001 02 2012 13

Qty % Qty %

P l Oil 2944 29 08 8572 49 49Palm Oil 2944 29.08 8572 49.49

Soy Oil 2258 22.30 2729 15.76

Mustard Oil 1721 17.00 2043 11.80

Sunflower Oil 309 3.05 1171 6.76Sunflower Oil 309 3.05 1171 6.76

Cotton Oil 443 4.38 1130 6.52

G d t Oil 1216 12 01 148 0 85Groundnut Oil 1216 12.01 148 0.85

Source : GGN Research 18

Consumption Projection for 2014/15 & Comparison with 2013/14& Comparison with 2013/14

INDIA 2014/15 2013/14 2012/13

Population (Million) 1,283 1,268 1,256

Per Capita Consumption (Kg.) 15.00 14.40 13.80

Consumption Growth Per Capita 5.6% 4.50% 5.0%

Total Edible Oils Required Lac MT 193.00 182.80 174.0

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I di G tIndian Governments

Policy Changes

&

Its Impact on Vegetable Oils

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Edible Oils Industry Policy Background

Up to 1992, India was nearly self sufficient in terms ofits Edible Oil requirementits Edible Oil requirement

In 1994 Edible Oil imports brought under OGL (Freely In 1994, Edible Oil imports brought under OGL (FreelyAllowed)

From 1994-1999, the rate of Customs Duty was thesame for Crude Oils and Refined Oils

In 1999, the Indian Government introduced Duty999, yDifference between Crude Oils and Refined Oils toencourage value addition of refining within the country

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Edible Oils Industry Policy Background

After this, huge port based refining capacity were setup in the country mainly at Kakinada Kandla Haldiaup in the country, mainly at Kakinada, Kandla, Haldia,JNPT & Krishnapatinam

Current capacity of refining is 20 Million Tonnes andInvestment over US$ 2.5 Bn. However, the utiliised,capacity is less than 50%

Import Duty structure in India has undergone manychanges since inception to take care of the consumersi id d f h hinterest on one side and farmers on the other

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India - Import Duty Structure on Edible OilsNovember, 2014

WTO Duty on Crude

Duty on Refined

Current Tariff Value

,

Item Description Bound Rate

Crude Edible Oils

Refined Edible Oils

Tariff Value US$/Tn

(14.11.2014)

Soybean Oil 45% 2.5% 10% 847

Palmolein 300% 2.5% 10% 767Palmolein 300% 2.5% 10% 767

Palm Oil (Crude) 300% 2.5% 10% 734

Sunflower Oil 300% 2.5% 10% -

Rape/Mustard Oil 75% 2.5% 10% -p

The duty on crude oil is 2.5% while refined oil is 10% Import Duty is payable on Tariff Value as announced by the Import Duty is payable on Tariff Value as announced by the

Government of India on fortnightly basis23

Duty Structure by Indonesia & Malaysia

Indonesia introduced, an aggressive pro their refiningindustry Export Duty structure in October 2011 higherindustry Export Duty structure in October 2011, higherduty on CPO & Lower Duty on RBD Palmolein

Malaysia too, to protect their refining industry followedsimilar structure like Indonesia

Inverted Duty structure by Indonesia and Malaysia Inverted Duty structure by Indonesia and Malaysiachanged the Import Pattern in India

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Average Landed Cost of RBD Olein & CPO

US $ / T CIF India

Year (Nov Oct) RBD Olein CPO Difference

2007 08 1094 1003 912007-08 1094 1003 91

2008-09 701 629 72

2009-10 856 811 45

2010-11 1188 1129 58

2011-12 1050 1010 40

2012-13 832 802 302012 13 832 802 30

2013-14 (Up to Sept) 839 845 (-) 6

t

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31st Oct 2014 745 725 20

Impact of Nil Duty by Indonesia & Malaysia

Nil Export duty by Malaysia from 1st SeptNil Export duty by Malaysia from 1st Sept

Nil Export duty by Indonesia from 1st Oct

Reaction by Indian Farmer and Veg Oil IndustryIndustry

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Import of Palm Oil and Soft Oil by India

(Qty in 000 Tonnes)

Year(Nov.-Oct) Palm Oil %

Soft Oils% TotalSoybean

OilSunflower

OilRapeseed

OilOil Oil Oil

2009-10 6499 74% 1666 630 28 26% 8823

2010-11 6547 78% 1007 803 14 22% 8371

2011-12 7669 77% 1079 1135 98 23% 9981

2012-13 8292 80% 1091 973 28 20% 10384

2013-14 7956 69% 1509 1951 200 31% 116187956 69% 1509 1951 200 31% 11618

Source : SEA Data Bank

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India has

promisingpromising

demanddemand

thgrowth

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India has Promising Demand GrowthDemand Drivers in India are

Average GDP growth rate for period FY08 09 to FY12 13 was 7 1%Average GDP growth rate for period FY08-09 to FY12-13 was 7.1%Big emerging Indian middle classDouble digit growth of out of home consumption of edible oilsPer capita consumption of Edible oils in India at 14.40 kg (2013-14)g ( )

is still a lot below threshold level of consumption

Even with a moderate population growth the absolute increase inEven with a moderate population growth, the absolute increase innumber of people is quite higher

O Indian Edible Oils demand is both switchable and elastic:Switchable to other oils to quite an extent & is elastic to an extent

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Edible Oil Production, Demand & Import

1820

Qty : Mn T

121416

81012

246

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Consumption of Veg. Oils Domestic Avaibility of Veg. Oils Import of Veg Oils

For the year 2013-14 the consumption estimated at 18 0 MnT For the year 2013-14, the consumption estimated at 18.0 MnT.The Demand-Supply Gap of 11.0 MnT bridged through Import

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Demand / Consumption of Edible Oils in IndiaProjections up to 2025Projections up to 2025

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30Consumption in MnT

20

25

15

5

10

0

5

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025For Demand Scenario upto 2025

High growth in income levels increasing trend in spending & better living standards High growth in income levels, increasing trend in spending & better living standards High growth in consumption of edible oils and the consumption may reach 26.78 MnT by

2025 from present level of 18 MnT, ie, a 3% growth every year from 2012-13 onwards 31

Edible Oil Demand- Long Term Projection

Population Consumption Consumption Consumption

Year

@ 1.76%Growth

Consumption@ 3% Growth

Consumption@ 4% Growth

Consumption@ 5% Growth

Per C it M T

Per C it M T

Per C it M TIn Bn. Capita(In Kg)

MnT Capita(In Kg)

MnT Capita(In Kg)

MnT

2013 1.22 14.3 17.44 14.4 17.56 14.5 17.692015 1.25 15.2 19.00 15.6 19.5 15.9 19.872017 1.28 16.0 20.48 16.8 21.50 17.4 22.272019 1 31 17 0 22 27 18 0 23 58 19 1 25 022019 1.31 17.0 22.27 18.0 23.58 19.1 25.022021 1.34 18.0 23.79 19.5 25.70 21.0 27.722023 1.38 19.0 25.24 21.1 27.80 23.2 30.56

(Excluding Non-edible Oils)

2025 1.42 20.2 26.78 22.8 30.0 25.6 33.69

Consumption will be higher if growth is taken at 4% or 5% Consumption will be higher, if growth is taken at 4% or 5%

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Import of Edible Oil by India

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Edible, Vanaspati & Non-edibleImport of Vegetable Oils

, p

2006-07 To 2013-14 (Nov Oct)(Qty in MnT)

Vegetable Oils 13-14

12-13 11-12 10-11 09-10 08-09 07-08

(Qty in MnT)

Oils

Edible Oils 11.60 10.40 9.98 8.37 8.82 8.18 5.61

Non-edible 0.20 0.29 0.21 0.29 0.42 0.46 0.65

Vanaspati -- -- -- -- -- 0.02 0.05Vanaspati 0.02 0.05

Total 11.80 10.69 10.19 8.66 9.24 8.66 6.31

Import of Vegetable Oils is rising every year to bridge the Demand-Supply gap

Import of edible oil has doubled in last seven years

Source : SEA

Import of edible oil has doubled in last seven years

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Estimated Edible Oil-wise Import during 2013-14

+/- in(Qty. in MnT)

OILS2012-13 2013-14 +/- in2013-14

MnT MnT MnTCPO 5.89 6.25 0.36OLN 2.22 1.57 (-) 0.65

CPKO 0.18 0.13 (-) 0.05

TTL PALM 8.29 7.95 (-) 0.34SBO 1.09 1.95 0.84SUN 0.97 1.50 0.53

RAPE 0 01 0 20 0 19RAPE 0.01 0.20 0.19TTL SOFT 2.09 3.65 1.56

TOTAL 10.38 11.60 1.22TOTAL 10.38 11.60 1.22

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Edible Oil Import Requirement for 2014/15 & Comparison with 2013/14& Comparison with 2013/14

Figures in MnT

2013/14 2014/15

Figures in MnT

Opening Stock 1.41 1.8

Domestic Production 7.05 7.0

Total 8.46 8.8

Consumption 18 28 19 3Consumption 18.28 19.3

Deficit 9.82 10.5

Closing Stock 1.80 2.0

Import Required Edible Oils 11 62 12 5Import Required Edible Oils 11.62 12.5

36Source : GGN

(Figures in 000T)

India Country Wise Import Of Edible Oils (Jan Dec)

Country 2014 Jan-June2013 2012 2011 2010

Soybean OilU S A 95 18 146U.S.A. - 95 18 - 146Argentina 659 803 817 746 693Brazil 218 233 313 144 202Other Countries 69 42 32 51 66Other Countries 69 42 32 51 66Total 947 1174 1180 941 1107Sunflower OilUkrain 795 1058 1055 812 494Argentina - 23 37 43 93Other Countries 1 3 24 16 56Total 796 1084 1116 871 643Palm OilIndonesia 2077 5879 5308 5011 5255Malaysia 1124 2384 2494 1677 1542Thailand 72 209 4 49 28Other Countries - 1 11 8 3Total 3272 8472 7817 6745 6828Other Oils 158 401 282 228 351Grand Total 5173 11131 10395 8785 8929Source: OIL WORLD 37

Import of Edible Oil Projection for 2014-15

IMPORT BREAK UP (M T)IMPORT BREAK-UP (MnT)Oil 2013/14 (P) 2014/15 (F) +/-( ) ( )

Palm (Edible) 7.95 8.65 0.70

Soybean Oil 1.95 2.20 0.25

Sun Oil 1.50 1.40 (-) 0.01( )

Rapeseed Oil 0.20 0.25 0.05

TOTAL 11.62 12.50 0.88

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Long term Projection for Domestic Oil Supplies & Import Requirement in 2015-16 & 2020-21

(Figures in MnT)

& Import Requirement in 2015 16 & 2020 21

Edible Oil 2013-14 2015-16 2020-21

Domestic Supply 7.1 7.3 9.4pp y

Demand 18.3 20.3 25.7

Import Required 11.6 13.0 16.3

Growth in domestic production is not catching up with the growth in Growth in domestic production is not catching up with the growth inconsumption and hence imports by India may increase to 13.0 MnT in2015-16 and to 16.3 MnT in 2020-21 in normal scenario

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Scope for Sustainable Scope for Sustainable Palm Oil in Indiaa O d a

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Whether India is ready to Embrace Sustainability ?Sustainability ?

Indias Domestic Oil Palm Plantation is environmentallysound as its grown on the land which were earlier under

lti ti d t f t l dcultivation and not forest land.

India Supports sustainability and about 25 companies are India Supports sustainability and about 25 companies areregistered for certified Palm Oil.

People in the EU & developed countries can afford to paya higher price for certified Palm Oil but in India, where

fmillions are struggling to food and to clothe themselves,will be reluctant to pay higher price for Certified Palm Oil

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Way Forward to Promote Certified Palm Oil in India

Average Indian buyer / consumer is looking solely at the

Certified Palm Oil in India

g y g ycost. Onus is on the Exporting Countries to makesustainable attractive palm oil.

If Palm Oil producing countries wish to promote theexport of sustainable palm oil it must rectify its exportexport of sustainable palm oil, it must rectify its exporttax structure. At the very least, it must reduce exporttaxes on Certified Sustainable Crude Palm oil toencourage its Import by India and other developingcountries.

SEA is willing to join hands with ISPO/RSPO to promoteusage of certified palm oil in India, provided dutyg p , p ystructure is made attractive for Indian refiners &consumers. 42

Conclusion

India has been an importer of edible oil for long yearsIndia has been an importer of edible oil for long yearsbecause of a mismatch between demand and domesticproduction. In recent years, the supply shortfall has widenedrapidly, driven by rising incomes and population pressure.

Every increase in income translates to a rise in demand forfood products including cooking oil. Consumption-drivendemand growth has outstripped domestic supply growth,increasing the country's import dependence.

Cont..43

Cont..Conclusion

Government of India is seriously considering to reduce theDuty on Oilseeds from present 30% to 5 or 10%. If thishappens it would encourage import of high content oilseedshappens, it would encourage import of high content oilseedslike Rapeseed and Sunflower seeds. This will change thecurrent level of Import of Vegetable Oil by India, as ithappened in China.

Possibility of change of import duty on edible oils.

Cont..

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ConclusionCont..

How much of this incremental import demand of vegetable oils, particularly palm oil or soft oils, will be able to garner, would of course, depend on relative prices of various oils, tariff structure, landed cost & domestic supply. It would be in the vegetable oil producers' interest to look at India as a large market that isproducers interest to look at India as a large market that is going to be available for a very long-term for long years - and do all that is required to sustain and service it.

Make in India A New MantraMake in India A New Mantra.

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Dr. B. V. MehtaExecutive Director

The Solvent Extractors Association of IndiaA Premier Association of Vegetable Oil Industry & Trade in India

ISO 9001:2008 Organisation142, Jolly Maker Chambers No. II, 14th Floor, 225, Nariman Point, Mumbai 400 021

Tel: (+91-22) 2202 1475. 2282 2979, Fax.: (+91-22) 2202 1692

Email: solvent@mtnl.net.in , Website:www.seaofindia.com

File : 10th Indonesian Palm Oil Conference, Bandung, Indonesia, 27-28th Nov, 2014/ Word/Presentations

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