Indonesia cuts veg oil export duty to 9% for Nov from 13.5% Oct

In a major relief for Indian veg oil importer, Indonesia has cut export tax on crude palm oil (CPO) to 9% for November from 13.5% in October. The reduction in duty, however, is expected to help cut edible oil prices at least by Rs 5 a kg.

India imports over 9 million tonnes of veg oil to meet its estimated annual demand of 15.5 million tonnes. Indonesia being the largest origin of veg oil imports to India, tax reduction would provide a much needed relief to Indian consumers.

The government of Indonesia, three years ago, levied 19% export duty on CPO while the duty on refined oil was fixed at 9% in order to promote local refineries there. Since then, Indian veg oil refineries were struggling to become viable. The Indian government also kept its tariff, the price for calculating import duty, unchanged for over 6 years at around one third of the current prevailing price as on today.

 

Last month, however, the Indian government made import tariff market linked with aim to collect funds to its kitty.

According to trade sources, the overall impact would be positive on to Indian consumers.

Indonesia, the world’s largest palm oil producer, reviews the tax rates and base export prices every month to make it closer with the movement in its price in the spot market. The duty is based on average rates in Kuala Lumpur, Rotterdam and Jakarta. Palm oil on the Malaysia Derivatives Exchange, the global benchmark, has fallen 7% so far this year on a drastic decline in demand due to the sovereign debt crisis in Europe and a slowdown in China.

B V Mehta, Executive Director of the Solvent Extractors’ Association (SEA), however, feels that most of edible oil prices have declined by around 14% year on year.

Import of vegetable oils (edible and non-edible) during first eleven months of current oil year indicates 17.80% increase in import as per data compiled by SEA showed. Import during September 2012 is reported at 993,912 tonnes compared to 912,341 tonnes in September 2011, consisting of 976,417 tonnes of edible oils and 17,495 tonnes of non-edible oils i.e. up by 8.94%. The overall import of vegetable oils during the period between November 2011 and September 2012 was reported at 9,156,457 tonnes compared to 7,773,184 tonnes, a rise of 17.80%.

Meanwhile, palm oil inventories in Indonesia, the world’s largest producer rose to record 3 million tonnes at the end of September this year, around 50% more than the usual level, due to weak global demand on sluggish global economy.

Total CPO output in Indonesia is estimated to rise 6-10% this year to 25-26 million tonnes.