Auto Segment
Mutual Fund Segment
My Budget
Expert Speak
In Association With
Business Standard

Malay tax move alarms edible oil industry

Kuala Lumpur slashes export tax on palm oil processors and refiners seek import duty on crude and refined oil to stop expected surge

Related News

import from Malaysia is set to surge, with the world’s second largest producer cutting the export tax effective January 1. Import of crude palm oil (CPO) for blending with other edible oils and its use for making soaps and detergents is likely to hit a record in the next two months, say observers.

The has abolished the for CPO and introduced a revised tax structure. This lowers the CPO export tax rate to between 4.5 per cent and 8.5 per cent, depending on the average price during the previous two months. If the CPO falls below Malaysian 2,250 ringgit, the duty would be nil. Since the average price in the month ending December 9 was recorded at 2,164 ringgit, the effective export tax, in line with the revised notification on December 17 would be nil from January.

This will have a serious repercussion on the Indian edible oil industry, considering the ongoing marketing of kharif oilseed crops like soybean, groundnut and castorseed. Also, the rabi harvesting season would be disappointing for refiners and farmers due to expectations of a dip in prices in local markets due to cheap import.

Rising imports                                           (In million tonnes)
Oil year*  Edible Non-edible Total
2006-07 4.71 0.62 5.34
2007-08 5.60 0.64 6.25
2008-09 8.18 0.45 8.64
2009-10 8.82 0.41 9.24
2010-11 8.37 0.29 8.67
2011-12 9.98 0.21 10.19
*(November - October)                          Source : Solvent Extractors' Association

“Malaysian exporters will take full advantage of the zero tax to ship as much CPO as possible in January, to reduce their huge stock of over 2.5 million tonnes. In this process, India being a large importer, shall become a dumping ground for CPO and we would not be surprised to see a record import of CPO and RBD palmolein during January itself. This will have a serious impact on the price of domestic oils and oilseeds. Our oilseed farmers will be in distress, just as the harvest of mustard seed during the rabi season commences,” said B V Mehta, executive director of the apex trade body, the Solvent Extractors’ Association (SEA).

has taken up the issue with the government and again strongly pleaded to impose an import duty of 10 per cent on CPO and 20 per cent on RBD palmolein and RBD palm oil.

“Today, Malaysian CPO is more expensive than Indonesia. By keeping export duty at nil, the Malaysians are trying to make their CPO competitive. This will benefit Indian consumers, of course. Indian prices of RBD palmolein have dropped from a high of over Rs 62,000 a tonne to the current Rs 47,000 a tonne, a decline of 25 per cent within a few months. However, this is an absolute disaster for Indian oil palm growers and oilseed farmers. The Indian government is being merciless towards oilseed farmers,” said Dorab E Mistry, director, Godrej International and a global voice in the edible oil industry.

Oils declined a little over one per cent in the past two days, with CPO for delivery in January on the Multi Commodity Exchange closing the morning session today at Rs 410 for 10 kg. Refined soya oil for delivery in January closed at Rs 702.5 for 10 kg.

“The fall was triggered primarily by the Malaysia government’s decision. It is set to enthuse edible oil traders to build a massive stockpile. Hence, prices of edible oil have started responding to the higher availability of CPO from abroad,” said Naveen Mathur, associate director, Angel Broking.

The benchmark March contract on the Bursa Malaysia Derivatives Exchange fell 0.5 per cent to close at 2,330 ringgit ($763) a tonne. Prices moved in a tight range of 2,313-2,338 ringgit a tonne. The CPO price has declined 25 per cent so far this year, its largest annual drop since 2008, on record stocks, amid lower demand from importing nations.

India imports a large quantity of CPO from Indonesia due to a lower export tax. But both Indonesia and Malaysia have around 2.5 million tonnes of inventory each, which need to be sold without delay. India’s import of vegetable oil (edible and non-edible) set a record at 10.2 million tonnes during the last oil year (November 2011–October 2012), a rise of 20 per cent from the 8.7 mt in the previous year.

Read more on:   

Read More

Barley up 2.71%

Barley price improved by Rs 38.50 to Rs 1,458 per quintal following increased buying by traders at lower levels.

Recommended for you


Quick Links

Market News

Stock trader's guide to India Budget says sell

Sensex has risen 11 of the past 20 years in 60 days before the Budget. The benchmark index, however, has fallen seven of those 11 times in the ...

Markets upbeat ahead of Budget

On Friday, the benchmark indices rallied about two per cent, amid strong build-up of long positions by traders in the futures & options ...

Sugar mills speed up crushing to advance closure by a month

To reduce operating losses, mills plan to start closure for the season by March 15, arrears mount

Planters seek hike in import duty on rubber to 30%

Cheap imports in recent years have resulted in a massive fall in the prices of rubber in the domestic market

SEBI cancels Sahara's portfolio management licence

The asset management unit of the broader conglomerate is found to not having complied with the 'fit and proper' norms


Back to Top