Edible oil refineries plead for help

RBD import rises 74% in Nov'15-Aug'16; to set new record this year

In a blow for domestic refineries, the country’s import of refined edible oil is likely to double, to set a new record, in the current oil year (November ’15–October ’16), due to better realisation than importing of crude palm oil (CPO) and local processing.

Data from the Solvent Extractors’ Association (SEA) show import of refined, bleached and diodised or RBD palmolein at 2.19 million tonnes between November and August, as compared to 1.25 mt in the corresponding period last year. Till now, import of RBD palmolein was the highest in 2012-13, at 2.23 mt.

“Assuming the trend continues in the remaining two months, our overall import of RBD would reach 2.5 mt, a new record,” said B V Mehta, executive director, SEA.

Around half of India’s refining capacity of around 25 mt has been idle for several years.

The country meets 55-60 per cent of its edible oil demand through import, largely from Indonesia, Malaysia and Argentina. India’s production of edible oil has stagnated for years at 6.5-7.5 mt from domestic sources, while consumption has been rising at 500,000 tonnes every year, on growing population and rising incomes. India’s overall edible oil consumption in a year is currently 23.5 mt.

Import of vegetable oil (both refined and crude) rose four per cent to 12 mt between last November and August, from 11.6 mt in the same period last year. Overall oil import is estimated, therefore, at 14.5 mt, similar to last year.

“Malaysia and Indonesia have incentivised export of RBD to promote their own refineries and sell value-added products. Our policy has also supported them, at the cost of Indian refineries,” said a senior executive with one of India’s largest branded edible oil producers.

To promote shipment of the finished product, the government of Indonesia has levied $50 a tonne of export duty on the crude oil but only $30 a tonne on RBD stands at $30 a tonne. Similarly, the government of Malaysia has imposed an export duty of 6.5 per cent on crude palm oil but RBD is exempt.

Also, in last year's Union Budget, the import duty on palm stearin and palm fatty acid distillate was reduced to nil. Both are byproducts of CPO refining and constitute 25 per cent of the value. Also, the duty differential between CPO & RBD palmolein was retained at 7.5 per cent, making the refining route more expensive than direct import of refined palmolein. And, the government is reportedly considering reducing the import duty on both CPO and RBD, to curtain inflation.

“In a letter to the prime minister, we have urged to reduce the import duty on CPO from 12.5 per cent to five per cent and keep the import duty on RBD palmolein unchanged at 20 per cent, thereby maintaining a duty differential of 15 per cent,” said Mehta.