Edible oil producers seek lower duty on raw, refined imports

New Delhi: Fearing edible oil prices to rise further from the the 40% spike in the last two months, Indian Vegetable Oil Producers Association (IVPA) has asked the government to lower customs duty on imported crude and refined edible oil.

The trade body has also urged the government to keep a minimum of 15 per cent duty differential between import of raw material against imports of finished goods to facilitate better utilisation of domestic refining capacity.

The edible oil producers have asked the government to consider decreasing import duties of crude palm oil (CPO) to 30 percent from 40 percent and refined palm oil to 45 percent from current 50 percent.

“Like onions, we expect a sharp increase in edible oil prices in the months ahead. This can be checked if import duties are reduced. CPO duties should be reduced to 30 percent and refined oils duty should be kept at 45 percent. This will greatly help the domestic refining industry, which is struggling with under-utilised capacity, high prices and lower margins,” said Sudhakar Desai, president of the IVPA.

Refiners are also worried about the influx of refined palm oil owing to low duty differential between CPO and refined palm oil to 7.5 percent from 10 percent under ASEAN and India-Malaysia Comprehensive Economic Cooperation Agreement with effect from December 31. The industry also sees zero duty imports from Nepal and Bangladesh as a challenge.

“In the last 45 days, the prices of palm oil have rallied by about 45%. For instance, India price of crude palm oil (cost and freight) has gone up from $520 to $750 a tonne. All other oils have also gone up by 20-30%. So, it is possible that prices will further go up and may lead to food inflation,” he said.

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The levy of export tax by Malaysia & Indonesia on crude palm oil with effect from January 1 will add to inflationary pressure. “This move will lower the differential price between CPO and refined palmolein by $ 20 per tonne (in case of imports from Indonesia) & 5% (in case of imports from Malaysia), making refining in India expensive and non-viable,” said Desai.

According to the Solvent Extractors’ Association (SEA), an apex trade body of the vegetable oil Industry, there must be a 10% to 15% duty difference between crude oil and refined oil import.

“We need to run our existing refineries that are running at less capacity. The existing refining capacity in the country is around 30 million tonnes, but only 45% is utilized. At current levels “the increase in price of edible oils support farmers in getting higher returns compared to the minimum support price and there is no need to change the current import duty structure,” said Dr.B V Mehta, executive director, SEA.

Mehta said currently mustard and soybean farmers are getting higher price than MSP. Soybean ruled at Rs 4496 per quintal and rapeseed at Rs 4662 against MSP prices of Rs 3710 and Rs 4425 per quintal, respectively.


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