Despite mounting pressure by domestic oil producers' associations to re-impose import duties on all edible oils, analysts said the Indian government was reluctant to impose duty on CPO -- the world's cheapest edible oil -- ahead of the country's general election, as it would be more expensive for local consumers, news reports said on Friday.
Am Research analyst Gan Huey Ling described the development in India as positive, adding the tax differential between CPO and soybean oil enhances the attractiveness of CPO, which is now trading at a price significantly below soybean oil.
Based on Malaysian Palm Oil Board statistics, the international price discount between CPO and soybean oil was USD 235 per tonne last December against USD 336 per tonne in the previous month.
We believe that the absence of an import duty on palm oil would smooth out the flow of Malaysian palm oil exports to India, instead of just short-term demand spikes ahead of possible import duties, Gan said.
India used to be the largest importer of Malaysian palm oil before being replaced by China in 2002.
China overtook India as the biggest importer of Malaysian palm oil due to the growth of its economy and the abolition of the palm oil quota system. It imported palm oil mainly in refined form.
India imports CPO mainly from Indonesia while from Malaysia it imports mostly refined, bleached and deodorised (RBD) palm olein. India imports about 65,000 tonnes of palm oil from Malaysia every month.