SEA urges govt to hike duty difference between crude, refined palm oil

Edible oil industry body SEA has demanded that the government should increase the duty difference between crude and refined palm oil to 15 per cent from 7.5 per cent to curb imports of refined cooking oil and protect domestic players.

In a letter to its members, Solvent Extractors' Association of India (SEA) President Ajay Jhunjhunwala pointed out that Indian vegetable oil (comprising of edible and non-edible oil) refining industry is "facing challenges".

"The Indian edible oil Industry, with a size of Rs 3 lakh crore (USD 35 billion), holds significant importance. Over the last 12 years, Indonesia and Malaysia have imposed higher export taxes on Crude Palm Oil (CPO) compared to refined Oil to protect their refining industry. This has made refined oil cheaper, rendering Indian capacity redundant and unutilized," he said.

In India, the duty differential between CPO and refined palm oil has been reduced to 7.5 per cent, "serving the interests of the refining industry in Malaysia and Indonesia", Jhunjhunwala said.

He pointed out that the low duty differential is negatively impacting domestic vegetable oil refining industry.

"In light of this, SEA has once again appealed to the Government to raise the duty difference from 7.5 per cent to 15 per cent between crude and refined palm oil," Jhunjhunwala said.

The SEA President said that India's imports of vegetable oils reached an all-time high of 167.1 lakh tonnes during the recently concluded 2022-23 oil year (November-October), with edible oils shipments hitting a record high of 164.7 lakh tonnes.

"The palm oil segment accounted for almost 60 per cent of imports. The landed prices of RBD palmolein lesser than CPO due to exporting countries imposing higher export tax-cess on raw material. This situation poses a significant threat to the profitability and viability of our refining industry, with many units now functioning solely as packers," he said.

Jhunjhunwala said this scenario is undesirable as it could lead to an increase in Non-Performing Assets (NPA) for supporting banks and shareholders, along with heightened unemployment in the industry and the value chain.

The President also expressed concern over the ban on exports of deoiled ricebran.

"The ban negatively affects solvent extraction, without serving its intended purpose of reducing dairy costs as deoiled ricebran price has least impact on milk and dairy prices," he said.

Jhunjhunwala said the price of deoiled ricebran has sharply dropped to nearly Rs.13,500 per tonne from Rs 18,000 per tonne in August 2023.

"SEA strongly urges the concerned ministries not to extend the ban on DORB exports beyond end November 2023. We will also be meeting the concerned Ministers and senior officials in the coming days, hoping for a positive outcome," he told the members of the associations.