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Our Bureau

Mumbai , Sept 16

THE Finance Ministry has issued a notification reducing the tariff value for various imported vegetable oils in an attempt to mirror the weakening price trend in the international market. Tariff value is the price at which customs duty is levied irrespective of the invoice price.

These changes will mean a reduction in the quantum of Customs duty that vegetable oil importers will pay. Edible oil prices in the open market are likely to move down by anything between Rs 500 and Rs 1,000 a tonne at the wholesale level.

Highest level of tariff reduction on soyabean oil will make the commodity cheaper in the domestic market by over Rs 1,000 a tonne, while crude palm oil will be cheaper by about Rs 940 and refined palmolein by Rs 440.

The decision to bring down tariff values on various imported oils could not have come at a more inopportune time. The country is flush with a lot of imported oils that arrived over the last 4-5 months. Arrivals between April and August this year were an estimated 24.8 lakh tonnes, substantially higher than 16.6 lakh tonnes imported during the same period last year.

Already, the domestic edible oil market is sluggish with dealers complaining of poor offtake. Festival demand has been subdued so far. On the other hand, the current levels of prices have not created any resentment among consumers.

Worse, the kharif 2005 oilseeds crops are getting ready for harvest. Market arrivals should begin in less than a fortnight. Crop conditions are not satisfactory with the strong possibility of a decline in kharif oilseeds output by as much as 20 lakh tonnes. A reduction in edible oil prices at this point of time would hurt oilseed growers because the tariff reduction would depress farmgate prices.

It is unclear for whose benefit the reduction has been carried out. There is bound to be revenue loss for the exchequer. It is, of course, sure to bring windfall gains to importers. But it is an entirely different matter whether the importers will pass on the benefit of lower duty to consumers.

The manner in which tariff value changes have been effected in recent years has drawn criticism from industry and trade circles. No doubt, tariff values have to reflect market conditions. But even in the past, there were periods when tariff values remained unchanged despite demands of the market conditions.

The demand for transparency in tariff revision and clearly set out guidelines for when and under what conditions any revision would take place has assumed greater urgency now.

In the latest instance, a sharp reduction in tariff value on soyabean oil will further depress domestic prices. It was widely expected that the market for new crop soyabean would open at Rs 12,000 a tonne. It appears, now, growers will have to settle for a price of Rs 11,500 a tonne or even lower.

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