In a meeting with Union agriculture minister Nitish Kumar and minister of state for consumer affairs & public distribution V S Prasad last week, representatives of the Solvent Extractor's Association (SEA) suggested a sharp increase in import duty on palmolein to 75 per cent. It further suggested that import duties on refined soyabean oil and crude edible oil should be raised to 45 per cent and 35 per cent respectively.

SEA president Sandeep Bajoria told the minister that it was imperative that the request of an import duty hike be considered and implemented at the earliest before harvest season for the Kharif oilseeds crop began. "If edible oil imports is not slowed down, there are chances that the domestic oilseeds crop would be sold below the minimum support price (MSP). This will have serious repercussions on the farmers and the industry."

The effective duty on palmolein, as suggested by the association, would work out to be 82 per cent {75 per cent basic duty plus four per cent special additional duty (SAD)}. Effective duty on soybean oil would work out to be 50.8 per cent (45 per cent basic duty plus four per cent SAD), while that on crude edible oil would be 38.5 per cent (35 per cent basic duty plus 3.5 per cent surcharge).

The present import duty applicable on RBD palmolein is 50.8 per cent (45 per cent basic duty + plus four per cent SAD), on soyabean is 44.04 per cent (35 per cent basic duty plus 10 per cent surcharge plus 4 per cent SAD) and on crude vegetable oils is 27.5 per cent (25 per cent basic duty plus 10 per cent surcharge) The delegation pointed out to the minister that despite the duty hike on imports implemented in June, imports had not slowed down. The country was worst affected by the surge in inflow of varieties of palm oil. Palm oil products constituted 70 per cent of the 30 lakh tonnes of edible oil imported by the country in the first nine months (Nov '99 to July 2000) of the current oil year.

Soyabean oil accounted for 13 per cent of the total imports while sunflower oil and rapeseed oil accounted for 12 per cent and 3 per cent respectively. Other vegetable oils imported by the country accounted for the balance 2 per cent.

According to Bajoria, it was possible to increase import duty on edible oils significantly even within the current WTO bound rates . The bound rates under WTO for palmoil and sunflowerseed oil is 300 per cent. For rapeseed oil the bound rate has been raised to 75 per cent from 45 per cent while for soybean oil the bound rate is at 45 per cent.

The current import tariff on most of the edible oils, with the exception of soyabean oil, are much below the bound rates, Bajoria said. "It is possible to implement the duty structure that we have suggested to protect interests of the domestic farmers and the industry."

The SEA chief told the minister that the fear that a heavy increase in import duty on palm oil would result in a shift in imports in favour of soyabean oil was baseless.

Bajoria explained that RBD Palmolein was the cheapest oil available in the world and the Indian industry was well aware of the logistic and price advantages of importing it from Malaysia and Indonesia compared to importing soyabean oil from the US, Argentina or Brazil.

Refined palmolein is cheaper by $50-60 compared to refined soyabean oil, Bajoria argued.He said that the current CIF price of refined palmolein was $ 310 against the CIF price of refined soyabean oil at $ 365. The price difference would keep palm oil attractive vis-a-vis soyabean even after a duty increase. If there is an increase in import duty on plam oil by 30 per cent, there might be only a marginal shift in favour of soyabean oil."

Bajoria said that the increased duty structure suggested by the association should be implemented by the government at the earliest as it would surely help to cut down imports and improve the situation for domestic players.