Govt may raise duty on edible oil imports.

The government is examining a proposal to increase the import duty on refined edible oil.

To this effect, the department of food, under the ministry of consumer affairs, is in the process of giving a proposal for consideration of the finance ministry. “Currently, both a rise in import duty as well as tariff value on imports are under examination to discourage import of edible oil," said an official. Tariff value on imports is like a reference rate prescribed by the government in dollars, on which import duty is levied.

According to officials, edible oil prices are already high in the retail market, as around 50 per cent of the demand has to be met by imports. Indonesia, from where a majority of the edible oil is imported by India, has raised the duty for export of both crude and processed refined palm oil. However, the increase in export duty on crude oil is much more than on processed or refined oil, which is why importers are preferring import of refined oil. In Indonesia, while refined oil has an export duty of nine per cent, crude oil export duty is double at 18 per cent. Consequently, as an importer, India will have to pay more.

Official sources said the proposal to raise the import duty on refined oil will mostly encourage import of crude oil. It will also help the domestic industry, since suppliers will mainly depend on domestic refiners.

India imports palm oil from Indonesia and Malaysia and soybean oil from Brazil and Argentina. The country imports about 50 per cent of the domestic demand. There is zero duty on crude edible oils and 7.5 per cent on refined edible oils.

According to data compiled by the Solvent Extractors’ Assoc-iation of India, import of vegetable oils during April was 925,334 tonnes, compared to 475,123 tonnes in April 2011, consisting of 897,404 tonnes of edible oils and 27,930 tonnes non-edible oils, up by 95 per cent. Overall import of vegetable oils during November 2011 to April 2012 was 4.72 million tonnes, compared to 3.6 million tonnes, up 31 per cent.

According to the data, during November 2011-April 2012, import of refined oil (RBD palmolein) was up an alarming 89 per cent and reported at 919,507 tonnes, compared to 487,090 tonnes during the same period last year. The share of refined oil has increased year-on-year by 20 per cent, while that of crude oil decreased to 80 per cent. The sharp increase in refined palmolein oil is attributed to the inverted duty structure of Indonesia, which encourages larger export of refined oils.

On the other hand, sunflower oil is emerging as a major contributor in meeting demand for soft oil, as internationally its prices are attractive compared to soybean oil, according to market sources. Also, India has started importing canola oil and safflower oil.

Source : smartinvestor.business-standard.com