The Hindu Business Line : Customs duty on sunflower oil may be cut

Need for cut
Duties on sunflower oil are levied on the actual landed price but in the case of soya oil and palm group of oils, these are computed on the ‘tariff value’.
Effective duty on sunflower oil above 45% compared with less than 20% for palm and soya oils.

Harish Damodaran

New Delhi, Feb. 22 A reduction in the import on sunflower oil is quite likely in the coming Union Budget, according to industry sources.

Currently, the import duty on crude sun oil is 41.2 per cent (40 per cent basic customs duty plus three per cent education cess), while being 51.5 per cent (50 plus 3X50/100) for refined sun oil.

Tariff values

On the face of it, these are quite comparable to the 40 per cent levied on both crude (de-gummed) as well as refined soyabean oil, 46.35 per cent (45 plus 3X50/100) on crude palm oil (CPO) and 54.075 per cent (52.5 plus 3X52.5/100) on refined, bleached, de-odourised (RBD) palmolein.

But the catch here is that while the duties on sunflower oil are levied on the actual landed price, in the case of de-gummed soya oil, CPO and RBD palmolein, these are computed on the ‘tariff value’ or base price fixed by the Finance Ministry.

On Friday, imported CPO was being quoted at $1,200 a tonne (cost & freight, Mumbai), while corresponding ruling at $1,267 for RBD palmolein, $1,450 for de-gummed soy and $1,723 for crude sunflower oil. On the other hand, the tariff values are much lower: $447 a tonne for CPO, $484 a tonne for RBD palmolein and $580 a tonne for de-gummed soya oil.

Effective duty

The effective duty incidence on importers (relative to the actual current landed costs), therefore, works out to just 17.3 per cent on CPO, 20.7 per cent on RBD palmolein and a mere 13.5 per cent on de-gummed soyabean oil.

This is as against the corresponding notified rates of 46.35 per cent, 54.075 per cent and 40 per cent, respectively.

Repeat performance?

“The contrast is particularly sharp when we compare the 13.5 per cent effective duty on de-gummed soya vis-À-vis the 41.2 per cent on crude sun oil. And both these cater to similar market segments, being low in saturated fats,” the sources added. The contrast has widened, especially as the tariff values on palm and soybean oils have been frozen since August 2006, even as the duty on sun oil continues to be levied on the actual landed cost.

In the 2007-08 Union Budget, the Finance Minister, Mr P. Chidambaram, had reduced the basic customs duty on crude sun oil from 65 to 50 per cent and that on refined sun oil from 75 to 60 per cent, while leaving those for other oils unchanged. The duties on crude and refined sun oils were further reduced to 40 per cent and 50 per cent, respectively on July 25.

“There might be a repeat again in this year’s Budget. But with domestic sun oil now at around Rs 77,500 a tonne, the duties will have to be slashed to at least 10 per cent for any meaningful impact on prices. Whether such as sharp reduction will happen is a moot point,” the sources pointed out.

Crude sunflower oil imports totalled 195,245 tonnes during the 2006-07 oil year from November to October. In the current 2007-08 oil year (between November and January), not a single tonne has been imported, according to the Mumbai-based Solvent Extractors Association of India (SEA).

Dipping soya oil import

Skyrocketing international prices have also led to a decline in crude soya oil imports, from 1,44,990 tonnes in November-January 2006-07 to 91,250 tonnes during the same period of the current oil year. However, imports of CPO – which are more competitive following the cut in import duty from 88.8 per cent till August 2006 to 46.35 per cent now -– have shot up from 700,265 tonnes to 934,887 tonnes.

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