India’s monthly refined edible oil imports hit a six-year high in May, due to a cut in customs duty by the Indian government under the Comprehensive Economic Cooperation Agreement (CECA) between India and Malaysia.
Effective January 1, the Centre cut the overall import duty on crude palm oil (CPO) from Malaysia, Indonesia and other members of the Association of the South East Asian Nations (ASEAN) to 40 per cent from 44 per cent earlier, while that on refined edible oil (RBD or refined, bleached de-odorized palmolein) from Malaysia was slashed to 45 per cent and from other countries to 50 per cent. The earlier duty rate was 54 per cent irrespective of the source.
The duty cut has started taking a toll on Indian edible oil refineries, with their capacity utilisation declining to below the survival level of 35 per cent. Oilseed prices also remained subdued due to weak demand from crushing mills.
“During the past few months, the duty advantage given to Malaysia for Palmolein under the India-Malaysia CECA Agreement has flooded the domestic market with RBD palmolein from Malaysia. The reduction of duty difference from 10 per cent to 5 per cent between CPO and palmolein has brought about a spike in RBD palmolein imports, and has hit domestic seed crushing mills and farmers hard,” said B V Mehta, Executive Director, the Solvent Extractors’ Association (SEA).
Data compiled by the SEA showed India’s import of RBD palmolein rose from 130,000 tonnes in December 2018 to 371,060 tonnes in May 2019, the highest in any single month since May 2013. Industry sources fear a further increase in its import.
India, which meets around 70 per cent of its annual demand of edible oil through imports, has reported total inbound shipments of 1.22 million tonnes of vegetable oil in May, which is five per cent lower than 1.29 million tonnes reported in the corresponding month last year. Of the 819,650 tonnes of edible oil imported in May, RBD palmolein contributed to 371,060 tonnes, taking its share in the overall edible oil basket for the month to 46 per cent. India imports over 15 million tonnes a year of refined oil primarily from Malaysia, CPO from Indonesia and refined soya oil from Argentina.
Meanwhile, the industry has called for scrapping the CECA agreement for the devastating effect it is having on Indian edible oil industry and oilseed farmers alike.
Said Atul Chaturvedi, Vice Chairman of Shree Renuka Sugars and President of SEA, in a memorandum sent to Prime Minister Narendra Modi: “We strongly appeal to the government to kindly scrap the CECA agreement with Malaysia with immediate effect and impose higher tariff on RBD palmolein to save domestic refiners and oilseed farmers from impending ruin.”
Many edible oil refineries have turned to packing refined oil imported in bulk and distributing it in small lots for retailing. This has also resulted in the closure of many small refineries.
“When the government is emphasising on employment generation, edible oil is an industry which would start retrenching of workers soon in case import of RBD palmolein continues at the same pace,” said Mehta.
With the forecast of normal monsoon this year, oilseed prices are likely to remain subdued which may add worries of farmers in coming months.