Tuesday 28 June 2022
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Ukraine conflict to shoot edible oil prices up but not impact LIC IPO

Sunflower oil comes from Ukraine and Russia and their supply chain will be disturbed, affecting an import of almost 2.0 lakh Mts of the oil per month

A direct effect of the Russian invasion of Ukraine will be a further increase in edible oil prices, especially that of sunflower oil, traders and solvent manufacturers have warned. They have also warned of prices rising due to disruption of the supply chain. Ukraine is the single-largest destination of crude sunflower oil for India.

For the November-October (oil supply year) 2020-21 India had imported a total of 18.93 lakh tonnes of crude sunflower oil. Of this 13.97 lakh tonnes was from Ukraine alone. Argentina (2.24 lakh tonnes) and Russia (2.22 lakh tonnes) are the other major suppliers but as the figures show Ukraine is perhaps the only major supplier to India.

President of the Solvent and Extractors Association (SEA) Atul Chaturvedi said prices were expected to rise. “Yes, markets definitely have the serious potential of moving northwards. Sunflower oil comes from Ukraine and Russia and its supply chain will be disturbed. We almost 2.0 lakh Mts of sunflower oil per month,” said Chaturvedi. SEA is the apex body of edible oil manufacturers.

The Russia-Ukraine war coincides with inflation in edible oil prices in the Indian market. The price of refined sunflower oil in the retail market has shot up to Rs 161.94 a litre as compared to Rs 145.03 a litre, according to the Price Monitoring Cell of the Union Ministry of Consumer Affairs. Supply chain disruption can easily see prices increasing significantly.

Chaturvedi said while Argentina could be a substitute supplier, the South American could not meet the quality necessary to fulfil domestic demand.

The edible oil price rise is part of the retail food inflation, which has become a major problem in the country, making the Ministry of Consumer Affairs take multiple steps to control this.

Another fallout of this war is a sudden escalation in the average traded price of soybean across Indian wholesale markets. At Latur’s wholesale market in Maharashtra, soybean price has risen from Rs 6,200 per quintal in the last two days to more than Rs 7,000 a quintal.

Vice-President of Soyabean Processors Association of India Naresh Goenka said the price rise was a combined impact of the Ukraine situation as well as bad crops in Argentina and Brazil. “We feel prices can remain in this range for the next few weeks,” he said.

Russian troops today launched multiple bomb attacks on Ukraine, as the Government of India closely monitored the rapidly changing situation in and around the CIS country.

Ukraine situation not to impact LIC IPO

Yet, the upcoming initial public offering (IPO) of Life Insurance Corporation will go ahead as planned, sources said, adding the government had time till the first week of March to take a decision on it. “Don’t see an impact on LIC IPO plan for now,” sources said.

Government sources asserted that India was prepared to deal with any situation arising out of global developments and added that they did not expect the impact of the crisis to be severe on the Indian economy. Sources said the geopolitical tensions potentially push up interest rates and also inflation, but these could still be manageable.

They say that an increase in borrowing costs, if any, could be manageable. It is also mentioned that any escalation of the global situation may oil supply to boost more rapidly from the Organisation of the Petroleum Exporting Countries (OPEC) and allies.

On the Iranian oil export hopes, there could be a possible revival on this front as this could restore the country’s supplies.

Russian President Vladimir Putin announced a special military operation in Ukraine as weeks of diplomacy to avert war and sanctions on Russia failed to deter Vladimir Putin, who has amassed over 1,90,000 troops along the Ukraine border.

The Indian embassy in Ukraine said the present situation in Ukraine was uncertain. “Please maintain calm and remain safe wherever you are, be it in your homes, hostels, accommodations or in transit,” it said in a statement.

Expressing concern for ongoing tensions between Russia and Ukraine, India today said that the situation was in danger of spiralling into a major crisis, which may undermine the peace and security of the region.

India’s Permanent Representative to the United Nations TS Tirumurti reiterated India’s call for immediate de-escalation of tensions.

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