Duty hike on soybean oil to help more palm imports

Written by Commodities Bureau | Agencies | New Delhi, Nov 19 | Updated: Nov 20 2008, 06:15am hrs
India's palm oil imports, which already constitute more than 80% of the total edible oil imports, could rise further after the Central government imposed a customs duty of 20% on crude soybean oil thereby making the already costly soy oil more dearer, traders and industry representatives said.

It also won't have a profound impact on pushing up local prices and thereby benefit oilseed growers, who have been reeling under sharp fall in global and international prices as local prices of the end product (edible oil) will still be depressed because of higher palm imports.

The government on Tuesday re-imposed an import duty of 20% on crude soybean oil, but left the import duties on refined edible oils and crude palm oil untouched.

In April, the government had scrapped the import duties on crude edible oils and brought it down to 7.5% on all refined edible oils in view of surge in local and international rates.

However, since then not only has the wholesale price-index based inflation come down to single digit, but prices of edible oils has also dropped significantly

"This completely without logic and will leave the field open for more palm oil imports because the difference in landed cost of both the oils will widen further in favour of soyoil," said BV Mehta, executive director, Solvent Extractors' Association of India. Industry players said that in the new crop year that started in November, India might import more than 5.0 million tonne of palm oil as against 4.8 million tonne (MT) imported last year. Total edible oil imports in 2007-08 were 5.6 million tonne.

"Before the duty the difference between the landed cost of soybean oil and palm oil was around $344 per tonne (crude soy oil was costlier to palm by $344), but now that difference will rise to almost $480 per tonne, further cutting down on soyoil imports," Mehta added.

An increase in purchases by India may also help support prices of palm oil, which have plunged 67% from a record in March.

"The government may tax palm oil imports later this year to shield oilseed growers before elections due by May," said Dinesh Shahra, managing director at Ruchi Soya Industries Ltd., India's biggest importer of edible oils told Bloomberg news.