Edible oil industry seeks tariff protection

After Indonesia announced a sharp reduction in export duty on refined palmolein, Indian refiners have urged the government to immediately correct the anomaly in import duty to stop the possible flood of refined edible oils at the expense of domestic refiners.

The domestic edible oil industry demanded the government raise the import duty on refined palmolein to 16.5 per cent, from 7.73 per cent, and lift the four-year freeze on tariff value of edible oils.

Indonesia, one of the biggest suppliers of palm oil to India, is lowering its export tax on packaged refined palmolein to two per cent, from 15 per cent, and that of bulk palmolein oil to eight per cent from October 1. It is also raising the import duty on crude palm oil to 16.5 per cent, from 15 per cent.

The domestic industry has already imported almost six million tonnes of palm oil from Indonesia in the current edible oil marketing year that will end in October, of the total 8.5 mt of oil imports. It feels the domestic refining industry will suffer if barriers are not put in place to stop the influx of refined palm oil from Indonesia.

The tariff value on refined palm oil has not been changed for four years, so the effective duty is much less than the actual one. Industry players demanded the tariff value be realigned to curb the import of refined palm oil.

The tariff value on refined palm oil is at $484 per tonne and the market rate is $1,150. So, the effective import duty is just 3.5 per cent, while on paper, it shows 7.73 per cent.

“The notion that raising the import duty on refined palm oil at this juncture will further push up the already high inflation, is also misplaced, as domestic edible oil companies have sufficient spare capacities to refine as much as crude as possible,” said Sushil Goenka, president of Solvent Extractors’ Association of India, the country’s largest body of domestic edible oil makers.

He said the industry was capable of sustaining any demand push, as it had a refining capacity of 20 mt, while supplies were much less.

The industry, valued at Rs 90,000 crore, comprises big players like Ruchi Soya Industries, Adani Wilmar, ITC and Bungee.

The bulk of the industry meets the local demand for edible oils by importing palm and soyoil in crude form and then refining at their local units.

It also crushes domestically produced oilseeds like soybean, groundnut and mustard. But this is increasingly becoming a lesser portion of their total businesses, as local oilseeds production has stagnated at around 24-27 mt annually, while the edible oil demand is rising by four-five per cent a year.

Local oilseeds are just enough to meet less than half of the total demand of 11-13 mt. While palm oil is imported from Indonesia and Malaysia, soyoil is imported from Brazil and Argentina. In 2010-11 crop marketing year, India imported 8-8.2 mt of edible oils, a year before that imports were around 7-7.5 mt.

“In 2011-12, we believe imports will rise to 9-9.2 mt,” said Dinesh Shahra, managing director of Ruchi Soya Industries.