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G. Chandrashekhar

MUMBAI, Feb. 14

ARE crude palmolein imports into the country nearing their end? It is likely the days of crude olein arrivals will soon be over if revenue officials are serious about plugging customs duty leaks.

For a start, letters have already started going from certain customs houses to importers of a product described as crude olein seeking detailed information about the product, manufacturing process, chemical characteristics and so on.

This has generated a certain panic among that class of importers engaged in crude olein imports. However, so long as there is no official ban on such imports, arrivals will continue, it is suspected.

Crude olein imports have been resorted to primarily with a view to beating the high level of basic customs duty on refined palmolein at 85 per cent. On crude palm oil, the basic customs duty is 65 per cent. By the process of fractionation, palm oil can be separated into liquid fraction called olein and solid fraction called stearine.

Importers actually purchase refined palmolein and cause to blend it with a certain percentage of palm fatty acid distillate (a by-product of palm oil refining and used for industrial application) so that the quality specifications are rendered lower than those specified for refined palmolein.

Importers thus get away with paying lower customs duty of 65 per cent merely by degrading a good product with some inferior admixture. Worse, it is widely believed that a large part of such crude olein imported into country purportedly for refining is actually palmed off as refined palmolein. This has serious health implications for consumers. Often, institutional users such as restaurants and halwais are ready customers for such a cheap product.

If anything, crude olein is a spurious and degraded product concocted with the joint ingenuity of overseas suppliers (in Malaysia and Indonesia) and Indian importers. It is prepared by degrading refined palmolein with admixture of up to five per cent of PFAD.

Interestingly, official statistics of Malaysia do not show any production of crude olein. Indeed, it is well-known that it is uneconomical to produce crude olein by fractionating crude palm oil. What is fractionated is refined palm oil which yields refined olein and refined stearine.

There is another way to beat the Indian tax regime and cause revenue loss. As the quality specifications of crude palm oil and crude palmolein are overlapping in some aspects, some importers tend to declare crude olein as crude palm oil because the latter bears a lower tariff value.

In this skulduggery, the Ministry of Finance cannot escape blame. Indeed, the Indian government legitimised a non-existent product (crude olein) by fixing a tariff value on the same in August 2001. Even subsequently, protests by well-meaning players and media reports were ignored. So much for efficient indirect tax administration in the country.

Since 2001, nearly 10 lakh tonnes of crude olein have entered the country. One can well imagine the quantum of revenue loss and harm done to consumer health.

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