Govt urged not to raise duty on palm products

The Solvent Extractors' Association of India (SEA) has asked the government not to increase excise duty on palm products and to freeze the tariff value for protection of consumer interest.The association fears that the government might levy excise duty in the next Budget.

SEA said in a letter to finance minister that imposition of excise duty would raise the price of edible oil and give less realisation to farmers for their produce.This may discourage the farmers from growing oilseeds.

The country consume about 120 lakh tonne of edible oil. Groundnut, rape-mustard and sesame constitute 65 per cent of the total domestic availability. These are mainly produced by small expellers which is consumed in raw form (filtered oil).

Soybean oil, both imported and domestic, imported palm oil and solvent extracted oils are consumed after refining. The overall refining of vegetable oils in the country is about 50-55 lakh tonne.

Major refining units are located in Kandla(Kutch) and Kakinada. These units enjoy excise exemption having inbuilt capacity of 35 lakh tonne per annum and do not generate any revenue to the exchequer.They create unhealthy competition and have the advantage of large capacity coupled with excise exemption benefit. Due to this, they are seen as a threat to the survival of large number of small to medium scale refiners across the country.

The association also questioned the argument that levy of excise on refined edible oils would generate substantial revenues. There is a 4 per cent special additional duty (SAD) on imported oils, which stands at around 45 lakh tonne.

It said if excise duty were levied, MODVAT (modified value added tax) claims on actual excise duty paid by refiners and vanaspati units would shrink net additions to revenues.Thus, the addition to the exchequer in real terms may be only from refining of indigenous oils that is soybean oil, sunflowerseed oil and rice bran oil which is less than 20 lakh tonne.

After the excise paid on consumable chemicals used in refining and also on capital goods, the total revenue generation may be not more than Rs 100 crore. Therefore, the claims that the government would earn over Rs 700 crore is far from the truth.

"A better course of action to earn revenue would be to suitably adjust import duties and align tariff values with the prevailing market prices," the SEA said.