The Hindu Business Line : Strong Re pegs cost down for vegoil consumers

New Delhi, Nov. 6 The strengthening of the rupee vis-À-vis the dollar may be giving restless nights to exporters. But on the other hand, it has helped partially insulate consumers from runaway increases in global prices of many commodities.

Take for example, edible oils. Over the last one year, international prices have shot up from between 61 per cent for crude de-gummed soyabean oil to 122 per cent in the case of sunflower oil. However, during the same period, the rise in domestic edible oil prices has been contained within 15-20 per cent.

While that is still high, the fact is things would have been much worse had the dollar not weakened. With the dollar currently fetching Rs 39.3 against Rs 44.9 a year ago, the effective rupee price of imported oil has not risen to the same extent as the dollar-denominated landed price.

To illustrate, imported crude palm oil (CPO) was, on Tuesday, quoted at $925 per tonne (cost & freight Mumbai), translating into around Rs 36,350 at current exchange rates. Had the rupee not appreciated, the same imported oil would have cost Rs 41,530, which would have worked out over Rs five a kg, or 14 per cent higher.

Import tariff

But rupee appreciation has not been the sole reason for domestic prices not moving fully in tandem with global prices. The other factor has been the huge reduction in import tariffs carried out by the Centre.

Since August 11, 2006, the effective duty on CPO has fallen from 88.8 to 46.35 per cent, while similarly being cut from 99.4 to 54.075 per cent for RBD (refined, bleached, de-odorised) palmolein and from 50.8 to 40 per cent for de-gummed soyoil.

Moreover, the Centre has since July 31, 2006 frozen the ‘tariff value’ (the base price on which import duty is computed) at $447 a tonne for CPO and at $484 a tonne for RBD palmolein. The tariff value of de-gummed soyoil, too, has been left unchanged at $580 a tonne after September 15, 2006.

These are way below the existing landed prices: $925 for CPO, $985 for RBD palmolein, and $1,020 for de-gummed soyoil.

Given the huge difference between the actual landed cost and the base price on which tariffs are being levied, the ‘real’ import duty now on CPO comes to only 22.4 per cent (against the official 46.35 per cent), with the corresponding figures being 26.6 per cent (54.075) for RBD palmolein, and 22.7 per cent (40) for de-gummed soyoil.

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