India plans to impose an extra 5 percent tax on vegetable oil imports within weeks and use the revenue to help boost the country's stagnating oilseed production, two government sources said.
India is the world's biggest importer of vegetable oils, buying nearly $10 billion worth a year, its biggest import after crude oil and gold.
The country's consumption of vegetable oils - including palm oil and soyoil - has trebled over the last 20 years as the population grew and incomes rose, while output has increased by less than a third.
Now, the government plans to create an oilseed fund by imposing the 5 percent surcharge, or cess, that will be used to help Indian farmers step up oilseed production, said the sources, who did not wish to be identified in line with government policy.
India currently imposes a 40 percent import tax on crude palm oil and 50 percent on refined palm oils. But shipments of refined palm oils from Malaysia have since January been taxed only at 45 percent, under an agreement with Malaysia.
That led to a surge in refined palm imports in the first seven months of 2019.
Those tax rates will officially remain the same, but all products will be subject to the planned 5 percent surcharge in addition.
India buys palm oils from Indonesia and Malaysia, soyoil from Latin America and sunflower oil from Black Sea nations.
India's overall vegetable oil imports rose 4.6percent to 11.3 million tonnes since the current oil marketing began in November 2018, according to the Solvent Extractors' Association of India, a leading trade body. Vegetable oil imports in July surged 26% to 1.41 million tonnes, the highest since May 2013.
India's edible oil imports are likely to rise 7.3 percent in 2019/20 to a record high as scanty monsoon rains in June and July could curtail crop yields of summer-sown oilseeds such as soybeans and groundnut, a leading industry official said last month.
A successful Indian push to raise oilseed production would drag on the international market for the commodity, hitting its main suppliers.
Source: moneycontrol.com