Government should increase import duty on crude vegetable oils from 7.5% to 25% and refined vegetable oils from 15% to 45% to protect farmers and the domestic oil meal industry, said Solvent Extractors’ Association of India
By Sai Nikesh
The Union Ministry of Agriculture has proposed an increase in import duty on crude and refined edible oils to protect the domestic industry. The move came after the solvent industry body asked the government to protect farmers’ interest and ensure a level-playing field for the domestic oilseed processors.
“As a remedy to the current situation and to ensure that the farmer get remunerative price for his produce in ensuing kharif harvesting, we would strongly appeal to the government to immediately increase import duty on crude vegetable oils from 7.5% to 25% and refined vegetable oils from 15% to 45%, an official of the Solvent Extractors’ Association of India (SEA) told.
According to SEA, world supply of vegetable oil is in excess over the demand due to high production of oilseeds, palm oil and reduced demand for biodiesel.
Therefore, part of the increase in import duty will be absorbed by the exporting countries and its impact on India will be minimal. When the export levy of $50/tonne on crude palm oil (CPO) was imposed last month, the price fell below the level prior to imposition of export duty.
The price of CPO C&F India on July 16, 2015 was $610/tonne and after levy of said export duty, C&F India came down to $530/tonne.
SEA said that Indian vegetable oil industry has been suffering for the last three years due to nominal duty difference of 7.5% between crude and refined oil and inverted duty structure by Indonesia and Malaysia, the net exporters.
Higher duty on crude palm oil and lower duty on RBD palmolein has given additional advantage to the exporters of these countries.
Besides, duty-free export of palm products in India has given them further opportunity to offload their burgeoning stock, triggering sharp fall in the prices of oil seeds in the Indian market.
As a result of all these, capacity utilization of domestic vegetable oil refining industry has reduced to 45-50% against 65-70% in the past, said SEA.
SEA, in its recommendations to the government on August 17, had requested for an increase in import duty on edible oils- crude vegetable oil to 25% and refined vegetable oil to 45%.
According to SEA, the imports of edible oils crossed 100 lakhs tonnes during first 9 months of the current oil year (November 2014-July 2015), up 26% against 80 lakh tonnes imported during the same period of last year.
The imports are expected to touch 140 lakh tonnes mark worth $10 billion for the whole year, as against the last year’s import of 118.0 lakh tonnes, SEA said.
This article was published in The Dollar Business on August 24, 2015