Veg oil imports jump 25% in January ahead of duty hike in Budget 2018

India’s vegetable oil imports in January increased by 25 per cent, against a 10 per cent fall in December and a marginal increase in November.

The steep rise was seen ahead of an import duty hike announced in the Budget presented on February 1.

According to data released on Thursday by the Solvent Extractors’ Association (SEA), imports in January stood at 1.29 million tonnes (mt) compared to 1.03 mt in the corresponding period a year earlier. Overall imports during November to January were up by 6 per cent.

In the Budget, the import duty was raised on several vegetable oils. Additionally, a 10 per cent social welfare surcharge was levied on all imported goods, including edible oil, which resulted in a further 1-3 percentage point increase in the import duty. According to SEA Executive Director B V Mehta, this will provide a cushion to domestic refiners.

The probability of a duty hike and an empty edible oil pipeline at ports led to a sharp increase in imports in January. According to SEA data, the pipeline stock of vegetable oil in the beginning of January was 1.3 mt, the lowest since April 2017, while the port stock stood at 2.17 mt, the lowest since June 2017.

“India’s monthly requirement is about 1.83 mt, equal to 30 days’ stock against which the current holding stock (after January’s imports) is over 2.12 mt, equal to 36 days’ requirements,” the SEA said.

The average price of RBD palm oil in January was $669 per tonne against $788 per tonne in the corresponding period a year ago. The price of crude palm oil was also down from $794 per tonne in January 2017 to $669 per tonne.

The factors responsible for a sharp increase in imports were Malaysia’s decision to suspend export duties on crude palm oil last month, lower vegetable oil prices and a stronger rupee. Malaysia is reportedly holding stock of 2.6 mt and is dependent upon Indian imports. Last November, India had increased the import duty on crude and refined palm oil.

Malaysian Prime Minister Najib Razak in January had hoped his Indian counterpart Narendra Modi would review the import duty on Malaysian crude palm oil, which was raised to 30 per cent from the earlier 15 per cent.

Crude palm oil is imported at 30 per cent duty. During refining, palm fatty acid distillates and crude palm stearin — raw materials used for manufacturing soap — are generated. These by-products make up 25 per cent of crude oil. The SEA said the import duty on actual user condition on these by-products was nil. And the increasing imports were affecting the viability of refineries engaged in the processing of crude palm oil. 

veggi oil import graph