The government’s decision to revise import tariffs on refined, bleached and deodorised (RBD) palmolein is set to change the fortunes of domestic vegetable (veg) oil processors, including Ruchi Soya Industries, Liberty Oil, Adani Wilmer and Cargill India.
Apart from a boost in capacity utilisation, processing margins would significantly go up to make the companies more profitable.
Stepping ahead with the Cabinet’s decision to defreeze the six-year-old $484 tariff and make it market linked, the government yesterday raised the rate of RBD palmolein significantly to $1,053 a tonne. It also banned the export of branded edible oil in consumer packs, which was restricted at 10,000 tonnes for several years.
|DINESH SHAHRA" height="120" alt="DINESH SHAHRA" hspace="5" width="100" align="left" src="/newsimgfiles/2012/august/02082012/080312_18.jpg" />“Our bottom line was hit in the last few quarters due to under-capacity utilisation; we were operating at 75% due to lower import of crude palm oil. Import would go up with the increase in tariff. Hence, our operating capacity will improve to 100%”
MD, Ruchi Soya Industries Ltd
“We were operating at 30-40% of our refining capacity. But, now the operating capacity would increase to 50-60% with the import of CPO”
CEO (refined oils), Cargill India Ltd
“Ruchi Soya’s bottom line was severely hit during the last few quarters due to under capacity utilisation as the company was operating at 75 per cent due to lower import of crude palm oil (CPO). The import of CPO would go up with the increase in tariff. Hence, our operating capacity will improve to 100 per cent and make our business more profitable,” said Dinesh Shahra, managing director of Ruchi Soya Industries Ltd.
During the first quarter (April–June) import of crude palm oil witnessed only 3.26 per cent increase; whereas import of refined palmolein saw a jump of more than 90 per cent. The edible oil refining industry was reeling under the dual pressure of the adverse export tax regime imposed by Indonesia since October 2011, and the fixed rate for import of refined palmolein was frozen for the past six years.
The Cabinet Committee on Economic Affairs recently approved the proposal of the ministry of consumer affairs, food & public distribution to defreeze the tariff value on imported RBD palmolein. This will help Ruchi Soya in better capacity utilisation of refining and improve margins, he said.
“We were operating at 30-40 per cent of our refining capacity for the last few months. But, now the operating capacity would increase to 50-60 per cent with the import of CPO,” said Siraj Choudhary, chief executive officer (CEO) (refined oils), Cargill India Ltd.
According to Atul Chaturvedi, CEO of Adani Wilmar Ltd, the ban on export of 10,000 tonnes of branded consumer pack of edible oil (up to five kg) would have a minuscule affect on Adani’s business, the quantity being very low.
As the tariff value remained unchanged for about six years, though import duty on refined oil is 7.5 per cent, the effective rate is only about 3.6 per cent on current prices. In September 2011, Indonesia the largest exporter of CPO to India increased the export duty on CPO from 15 per cent to 16.5 per cent and reduced the export duty on refined palmolein from 15 per cent to eight per cent, which further affected the domestic refining industry.
During November 2011 to April 2012, 919,000 tonnes of RBD refined palmolein was imported against 487,000 tonnes during corresponding period in previous year (increase of 88.7 per cent), whereas imports of CPO increased marginally from 217,200 tonnes to 24.93 tonnes (increase of 14.8 per cent).
India’s total import of veg oil was recorded at 8.7 million tonnes out of total consumption of 15 million tonnes last year. This year (November 2011-October 2012), however, total import of veg oil is estimated at around 9.2 million tonnes. India imports palm oil mainly from Indonesia and Malaysia and soybean oil from Argentina and Brazil.