Indian veg oil trade seeks higher customs duties

Govt should raise customs duty on refined palmoil to arrest fall in local vegetable oil prices and protect farmers, industry officials said.

India, the world's largest edible oil importer, should raise the customs duty on refined palm oil to arrest a fall in domestic vegetable oil prices and protect farmers, industry officials said on Tuesday.

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The industry wants the Congress-led coalition Government, when it presents its budget on July 8, to put the duty on refined palmolein back up to 85 per cent and ensure a duty difference of at least 15 per cent between crude and refined palm oils to make sure processors can maintain a profit margin.

In early 2003, India lowered the duty on refined, bleached and deodorised (RBD) palmolein to 70 per cent from 85 per cent to give consumers some relief from high vegetable oil prices in the domestic market. It imposes a 65 per cent duty on crude palm oil.

The country imports almost half of its annual edible oil requirements of around 10 million tonne. It buys palm oils from Malaysia and Indonesia and soft oils from Argentina and Brazil.

"Raising import duty on refined palmolein to 85 per cent will arrest the fall in domestic prices and sustain the tempo of farmers to increase oilseeds production," said chairman of Solvent Extractors' Association of India (SEAI) DP Khandelia.

Industry officials said global vegetable oil prices had crashed over the last two months, resulting in a huge drop in domestic prices. Since March, RBD palmolein prices have dropped by $126 a tonne to $432 FOB (free on board) and soybean oil has fallen by $150 a tonne to $540 CIF (cost, insurance and freight).

"June and July are the months of sowing and during this time, if the prices crash, it would discourage farmers from increasing the acreage under oilseeds," SEAI said in a statement.

Trade officials said an increase in the levy on palm oils would create a duty difference between crude and refined oil and help the domestic vegetable oil refining industry.

"It is necessary to have different duty structures for crude and refined edible oils as the interests of processing industry are to be taken care of," said the southern India-based All India Edible Oil Manufacturers, Traders and Consumers Association.

India's vegetable oil industry comprises of 15,000 oil mills, 600 solvent units and 500 vegetable oil refineries. It has a domestic turnover of Rs 700 billion ($15.5 billion) and import and export turnover of Rs 150 billion by way of edible oil imports and oilmeal exports.

Edible oil imports by India fell by a sharp 65 per cent in May from a year earlier because of a significant rise in domestic output, a leading trade body said on Monday.

After good monsoon rains, the country's summer oilseeds output is estimated to have surged by 38 per cent from a year earlier to 8.29 million tonne in 2003-04 (November-October).

Oilseeds output for the whole year ending October is estimated at 24.98 million tonne, up from 15.1 million a year ago.

Traders said edible oil imports were expected to fall by about one million tonne in the April-June quarter from 1.77 million tonne in the corresponding period of the previous year.

India imported 2.07 million tonne of edible oil in the first seven months of the oil year that started in November 2003, down 26 per cent from 2.81 million tonne in November-May of 2002-03.

Traders said edible oil imports in 2003-04 were expected to fall to 4.2 million tonne from 5.1 million in the previous year.