Veg oil firms seek steep rise in protection against imports

At present, there is nil tariff on unrefined oil and 7.5 per cent on refined oils.

The tariff on imports of vegetable oil continues to be based on the market price in September 2006, and the domestic industry says this is absurd and harms both, them and the government.

In their pre-Budget memorandum, the Solvent Extractors Association (SEA) has urged that this ‘base tariff value’ be raised by at least 50 per cent, to bring it in line with prevailing prices. The latter have almost doubled since the September 2006 fixation, they noted. And, they have asked the tariff rate be raised. At present, there is a nil rate on unrefined oil and 7.5 per cent on refined oils. They have asked for a range of raises, depending on the product, complaining that domestic refineries are operating at below half their capacity, while customers import ready-to-use refined oil.
 

IMPORT TARIFFS
Oils	Present Tariff	Proposed Tariff Value
RBD Palmolein	484	705
Crude Palm oil	447	660
Soybean Oil	580	870
Sunflower Oil	Not fixed

850 Figures in $/tonne

The SEA has argued that the raise in the base tariff value would mean far more money for government coffers, even if the rate of duty remains unchanged.

The freezing of base tariff value was done as a special case in 2006 for fear of stoking inflation. The majority of vegetable oils required for domestic consumption (about 15 million tonnes a year) are imported. As an example, the current price of imported RBD (refined, bleached and deiodised) olein is $765 a tonne. But, the duty is collected on the basis of a price of $465 a tonne, at which the value has been frozen.

The tariff is 7.5 per cent, but with this difference in prices, it is effectively only about five per cent. Which is hurting us, complain the refiners, while you (the government) also lose money.

“If the tariff is revised upwards, the government’s revenue collection from this sector will increase at least by 50 per cent,” said an analyst.

SEA wants the base tariff value for all oils to be aligned to the current market price for edible oils. Also, in cases such as sunflower oil, where no such value has been fixed, it must be; imports have jumped. The domestic vegetable oil industry consists of 15,000 oil mills, 600 solvent extraction units, 600 vegetable oil refineries and 250 vanaspati units spread across the country. SEA has also demanded at least 20 per cent duty on crude palm oil, 30 per cent on RBD olein, 25 per cent on crude soybean oil and sunflower oil from the present level of nil duty on these two in this form and 7.5 per cent if these are refined.