According to Chennai-based oil broker and promoter of oilsandoilseeds.com PVR Krishna Rao, importers had artificially jacked-up prices in anticipation of duty hike on the import of palmolein. The prices had also flared-up because of poor arrivals of domestic oilseeds this season as well Malaysia holding strong, he said.

The oilseeds' crops failed this season due to shortfall of rains in Madhya Pradesh and Gujarat, infection in Telangana, Andhra Pradesh etc. As the domestic oilseeds (groundnuts, soya, mustard, rapeseed, coconut, til, sunflower and mustard) produce is expected to fall way short of the projected 121 lakh tonne, oil imports will have to increase to meet the shortfall.

The government is however awaiting the report of the study it had commissioned to forecast the prospects of domestic oilseeds production this year, before deciding on any change in the duty. The demand and supply forecasts from the trade, which will be released at the international convention on oils and oilseeds to be held on November 11 and 12 in Chennai, are also expected to play a major role in its final decision. Also, with elections around the corner in major states of Tamil Nadu, West Bengal and Uttar Pradesh, a duty hike on palmolein may now fuel not only inflation, but also the voters' animosity!

Prices in the Malaysian markets soared following reports of record exports of 10.5 lakh tonne in October as against 8.5 lakh tonne of Palmolein in September. However, due to high arrivals and stock accumulation in the face of low exports forecast for November, Malaysia may not increase its export prices this month. Coupled with this, when the rumours of the much-anticipated duty hike post-Diwali were squashed on Monday, importers started panic-selling to liquidate their stocks and the prices started falling once again. According to industry sources, the palmolein files are said to be put in cold storage following a bureaucratic reshuffle last week - secretary Food and Public Distribution P Shankar has been shifted as the Petroleum secretary, while the Petroleum secretary Dr S Narayan has been posted as the new Revenue secretary.

Some big importers in the country, however, continue to hold huge stocks (around two lakh tonnes) and expect to make a killing when the market soars post-duty increase. The traders are upbeat about the duty hike because, unlike in the past occasions, Malaysia is not expected to drop prices to neutralise the effect of the duty hike. When the government raised the basic duty on palmolein on December 30, 1999 and in June 12, 2000 to 25 per cent and 35 per cent respectively, Malaysia had reduced ts prices correspondingly.

This time round, the low harvest figures of Soya in the US are expected to flare-up the prices in Chicago Board of Trade (CBOT) this week, which will have a bearing on the Commodities and Monetary Exchange of Malaysia.

Traders in India are expecting the Malaysian prices to go up in December. And if the duty hike coincides with that, it will be a `sone pe suhaga' for them!