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Wednesday, Nov 26, 2003

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Govt rules out change in edible oil duty

Harish Damodaran
K.R. Srivats

New Delhi , Nov. 25

THE Finance Ministry has ruled out any changes in import duties on edible oils. Seeking to set aside market speculation on changes in duty structure, a top Central Board of Excise Customs (CBEC) official told Business Line: "There is no case for either an increase or reduction in duties now."

The official said an increase in import duties— sought by the Agriculture Ministry— was ruled out, since the existing rates were "already high" and international vegetable oil prices had also been hardening over the last few months.

At the same time, there was no justification for a reduction either, given that most importers were paying their duties out of credits accumulated under the duty entitlement passbook (DEPB) scheme.

"The importers are buying these from original DEPB holders at a sizeable discount in the secondary market, which effectively brings down their duty liability for clearing the imported oil consignments," he added.

Imported crude palm oil (CPO) and crude palmolein currently attract 65 per cent basic customs duty (BCD), while it is lower at 45 per cent for crude soyabean oil.

Refined, bleached and de-odourised (RBD) palmolein and palm oil, on the other hand, attract up to 70 per cent BCD and four per cent special additional customs duty (SACD), which effectively translates into a duty of 76.8 per cent.

Refined soya oil is similarly chargeable at 45 per cent BCD plus four per cent SACD, which makes for a total of 50.8 per cent. All refined oils, in addition, attract a flat countervailing duty of Rs 1,000 per tonne, equivalent to the Central excise duty paid by domestic refiners.

The official also defended the Finance Ministry's recourse to frequent changes in the tariff values or base price of imported oils.

Over the last month alone, tariff values— representing the assessable values on which the import duties are computed — have been revised thrice upwards (see Table).

"We do not change tariff values arbitrarily as and when we like. The tariff values are fixed taking into consideration international prices movements."

In the case of edible oils, the Directorate-General of Valuation (DGV), headquartered in Mumbai, computes the weighted average landed price of each oil for every week, based on their c.i.f (cost, insurance and freight) values and arrival quantities in all major ports of entry.

"We change the tariff values whenever the deviation between the DGV's weighted price and the existing tariff value exceeds 10 per cent. And this is precisely what we have been doing over the past month, when international prices, too, have exhibited unusual volatility," he said.

Ironically, when the Government began fixing tariff values for edible oils from August 2001, the primary objective was to address the problem of rampant under-invoicing resorted to by importers in order to avoid paying the high duties.

At that point of time, the invoice values being declared by importers were lower than the actual ruling international prices.

In recent months, however, both international prices as well as invoice values declared at the ports have tended to be higher than the tariff values, forcing regular increases in the latter to bring them on par with c.i.f values.

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