Trade slams soybean oil tariff value cut

The average price of crude soybean oil c.i.f. Indian port in January 2005 was $553 as compared with $570 in December 2004 and $550 in November 2004.

The Soyabean Processors Association (SOPA) has criticised the reduction in the tariff value of soybean oil at a time when the harvesting of the domestic rabi oilseed crops was on as the move would depress prices.

The Solvent Extractors' Association of India (SEA) said the downward revision of tariff value went against the market trend, as prices had not declined by 10 per cent.

Lower prices would force soybean growers from raising oilseed production, SOPA has told finance minister P Chidambaram.

In a communication sent today, SOPA chairman Rajesh Agrawal said there appeared to be no rationale for reducing the tariff value, i.e., the base price for levying import duty, of soyabean oil from $565 to $485 per tonne since the international prices of crude soybean oil were still ruling around $550-$560 a tonne.

SEA and SOPA would like the government to restore the price of crude soybean oil upward to the current c.i.f. price of $545.

This reduction, carried out through a notification issued on March 1, had created confusion in the domestic market.

It would also result in revenue loss to the government of about Rs 1,500 a tonne. Soybean, a major kharif crop in Madhya Pradesh, was also grown by many farmers in Maharashtra and Rajasthan.

The domestic prices of soybean seed in 2005 were already much lower than 2004 prices.

Lowering of tariff value would further depress prices, affecting the viability of soybean cultivation.

Agrawal alleged that the tariff reduction would benefit only edible oil importers who were holding large "in bound" stocks.

He urged the ministry to revise the tariff value appropriately and in line with the prevailing market conditions.

Agarwal said the change in tariff value may motivate farmers to shift from oilseeds to other crops.

The rape-mustard seed crop is being harvested at present and is being sold below the minimum support price (MSP) at Rs 1500 per quintal against the actual MSP of Rs 1700.

The downward revision of tariff value of soyabean oil would push down prices in Indian prices by Rs 1200-1500 per tonne of soybean oil and would further push down rape-mustard seed price realisation.