Edible oil body condemns govt's duty cut move

Instead of providing relief to local consumers from the overheating edible oil prices, the government is filling the coffers of the Indonesian government by reducing import duty on vegetables oils, according to Davish Jain, chairman of the Central Organisation for Oil Industry & Trade (COOIT).

In a letter to the finance minister, Jain said that Indonesia benefited every time the Indian government curtailed the import duty.

Last week, the import duty on crude palm oil was slashed to 20 per cent from 45 per cent, while that on refined palm oil was trimmed to 27.5 per cent from 52.5 per cent.

However, the duty on soya oil was left unchanged. Immediately after that the Indonesian government raised the base price of crude palm oil to $1,196 a tonne from $988 while base price of RBD palmolein was hiked to $1,303 from $1,063.

Thus, the effective export duty rise of crude palm oil works out to $140 a tonne while the duty rise of RBD palmolein comes out to $154.

Jain said that instead of benefiting the Indian consumers, the government is dumping money into the pockets of Indonesian government, which does not serve the government's purpose. India imports about 45 per cent, or 5.5 million tonnes, of edible oil requirements.

The letter stated that before the duty cut, global prices of edible oils were falling. Prices of crude palm oil came down from $1,325 a tonne on February 29, 2008 to $1,150 on March 20. Similarly, crude soybean oil prices came down from $1,570 to $1,375 during the same period.

The fall had its bearings on domestic prices. Refined soybean oil prices decreased from Rs 70,500 a tonne to Rs 64,000 , rapeseed/mustard oil prices fell by Rs 2,500 to Rs 60,000, groundnut oil dropped to Rs 71,500 from Rs 73,000 between February 29 and March 19.

Jain said that the situation might worsen for Indian farmers in the coming months as soybean crop in South American, which constitutes 50 per cent of the total world production, would hit record levels, pulling down prices.

"In such a competitive market, if Indian farmers do not get remunerative prices, they may shift to other crops, thereby making the country even more dependent," Jain pointed out in the letter.

Jain emphasised on increasing production of oilseeds in the country to insulate domestic consumers against spurt in international prices.