MCX-ComQuest-24-North-Zone-Finals

Edible Oil Import and Export Analysis

This project contains an in-depth analysis of India's edible oil import and export strategies, focusing on the economic impacts of changes in import and export duties and global disruptions on the edible oil market.

Table of Contents

• Introduction
• Articles
  • Article 1: India Keeps Edible Oil Import Duty Lower Until March 2025 and Imposes 50% Export Tax on Molasses
  • Article 2: India's Sunflower Oil Imports to Falter as Red Sea Attacks Lift Freight Costs
• Economic Impact Analysis
• Hedging Strategies
• References
• License

Introduction

This project presents a case study analysis of India's edible oil import and export policies, with a focus on the impact of import duty reductions and export duty increases. It also examines how global disruptions, such as conflicts affecting shipping routes, impact import prices and strategies.

Articles

Article 1: India Keeps Edible Oil Import Duty Lower Until March 2025 and Imposes 50% Export Tax on Molasses

• Reasons for 50% Export Tax on Molasses: The tax ensures availability for domestic ethanol production, especially with a projected 10% drop in sugar production due to lower rainfall.
• Reasons for Low Edible Oil Import Duties: To control domestic prices. Despite being the world’s largest importer, India's edible oil imports dropped 16% YOY due to high export duties by exporting nations.

Article 2: India's Sunflower Oil Imports to Falter as Red Sea Attacks Lift Freight Costs

• Impact of Red Sea Attacks: The attacks have led to increased freight costs, causing sunflower oil prices to rise and reducing its import share.
• Alternative Strategies: India is expected to increase soybean oil imports from South America to compensate for the shortfall.

Economic Impact Analysis

• Decrease in Import Duty: Leads to lower prices for consumers and increased import volumes, resulting in a net welfare gain for the economy.
• Increase in Export Duty: The economic impact varies based on the country's export market share. For small countries, it leads to a net welfare loss; for large countries, the impact is ambiguous and depends on the level of duty imposed.

Hedging Strategies

• Commodity Derivatives: Edible oil companies can use futures and options contracts to hedge against price volatility caused by global disruptions.
  • Long Futures Contract: Locks in purchase prices, ensuring no profit or loss from price changes.
  • Long Call Option: Provides protection against rising prices while allowing potential benefits from price drops.

References

• Economic Times
• Business Standard
• US Energy Information Administration (EIA)
• Reuters
• Hindu Business Line