The Hindu Business Line : Govt cuts tariff value on crude soya oil

IN what is good news for the consumer, but not so much so for farmers in the midst of harvesting the rabi oilseeds crop, the Government today effected a steep reduction in the tariff value of imported crude soyabean oil from $565 a tonne to $485.

The move comes just a day after the decision in the Union Budget to do away with the excise duty on edible oil and vanaspati, which amounted to Re 1 and Rs 1.25 a kg, respectively.

The lowering of tariff value of crude soya oil, notified by Central Board of Excise and Customs (CBEC) today, would mean that henceforth, the 45 per cent import duty on the commodity would be computed on a base price of $485 a tonne against $565.

Earlier, on February 15, the tariff values were similarly reduced for the entire palm oil complex, comprising crude palm oil (from $454 a tonne to $400), RBD or refined, bleached, de-odourised palm oil (from $489 to $415), `others-palm oil' (from $471 to $410), crude palmolein (from $479 to $412), RBD palmolein (from $497 to $425) and `others-palmolein' (from $488 to $420).

But on that occasion, the Government had simultaneously hiked the import duty on crude palm oil and crude palmolein from 65 per cent to 80 per cent and on RBD palm oil and RBD palmolein from 75 per cent to 90 per cent, even while the tariff value as well as import duty on crude soya oil were left unchanged.

Today's decision to bring down the tariff value of crude soya oil has, however, taken the domestic industry completely by surprise.

The stated purpose behind the Government announcing tariff values is to check possible under-invoicing by importers in order to save on duty liability.

By this logic, tariff values are to be adjusted periodically in order to reflect actual international price trends.

"But in this case, the new tariff value of $485 a tonne is way below today's landed price of $546 a tonne for crude soya oil at Indian ports," said Mr B.V. Mehta, Executive Director, Solvent Extractors' Association of India (SEA).

According to him, there is no logic in setting the tariff value so low, particularly when the landed prices have risen from around $520 a tonne in early February to the $545-546 levels of now, following recent reports of the soyabean crop suffering damage in Argentina and Brazil.

Moreover, never have prices ruled so low in the last many months to justify a tariff value of $485 a tonne.

"The average per tonne landed price of crude soya oil stood at $567 in August, $556 in September, $537 in October, $550 in November, $570 in December and $553 in January."

What is equally significant is that the $80 per tonne reduction in the tariff value on crude soya oil comes when harvesting of rapeseed-mustard and other rabi oilseeds has just commenced.

With the country's rapeseed-mustard production expected to touch a record 75.89 lakh tonnes (lt) this year, against 58.32 lt in 2003-04, open market prices are already ruling about Rs 200-300 a quintal below the official minimum support price of Rs 1,700 a quintal.

"The lowering of tariff value would further bring down crop prices, which will discourage farmers from cultivating oilseeds in the next season," Mr Mehta added.

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