The Hindu Business Line : Malaysian Minister flays India's vegoil tariff

WHILE the current high prices of crude palm oil ruling at (Ringgit Malaysia) RM 1,950-2,000 a tonne are justified by domestic and global fundamentals, the existing price differential of around $140-150 a tonne between palm oil and soyabean oil is not at all justified, according to the Malaysian Minister for Primary Industries, Dr Lim Keng Yaik.

"Given the fact that Malaysian stocks are relatively low at 1.07 million tonnes (mt) at the end of January (representing less than a month's production), and the superior functional properties of palm oil in both edible and non-edible applications (palm oil is free from transgenics and trans-fats), this current discount level is totally unjustified", he told a gathering of over 1,200 delegates here from 40 countries.

Delivering the keynote address at the Annual palm and lauric oils conference and exhibition: Price outlook for 2004-2005 organised by the Malaysian Derivatives Exchange (MDEx), the Minister expressed regret that India is practicing a discriminatory policy with respect to customs duty on different vegetable oils.

"The idealism of a level-playing field is hard to achieve given the different concerns of each country. Discriminatory or differential import duties in some major importing countries have adverse implications in the pricing of vegetable oils in the world market", he remarked, adding that in India, the biggest importer, duty on palm oil at 65 per cent is higher than on soyabean oil at 45 per cent.

The duty differential in India perhaps accounted for the price differential between palm and soya oils, the Minister opined. Short of openly criticising the Indian Government for pursuing such a discriminatory tariff regime, Dr Lim argued that because of high duties, poor Indian consumers end up paying more for cooking oil than their counterparts in Europe.

Later, at a press conference, reiterating his displeasure over India's inflexible stand on edible oil tariffs, the Minister observed that Indian oilseeds output has not increased despite protection, while differential tariffs continued to distort the market. He cautioned that the high growth of palm oil production (increase of 1.4 mt to reach 13.35 mt in 2003) might not recur in the current year.

To a specific question from Business Line whether Malaysia would be willing to reduce its prices if India were to reduce the duty on palm oil, Dr Lim, responding uncomfortably, said no assurance could be given, as price determination is a function of the market.

Asked about the fate of the proposed rail construction project to be awarded to India, the Minister remarked that the project has been postponed and that a new Malaysian Government would take up the matter.