The Hindu Business Line : Govt slashes duties on edible oils

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New Delhi Jan. 24 The Finance Ministry has yet again managed to overcome the Agriculture Ministry's opposition to effect a 10 percentage point cut in the basic customs duty on crude palm oil (CPO) and 12.5 percentage points in respect of RBD (refined, bleached, de-odourised) palmolein.

Further, it has been decided to keep the tariff values — the base prices on which duties are computed — on palm oils frozen at their end-July 2006 levels. As per the Revenue Department's notification issued here on Wednesday, the basic duty on CPO, crude palmolein and other fractions of CPO has been slashed from 70 to 60 per cent.

There has been a corresponding reduction in the duty on RBD palm oil, RBD palmolein and other refined palm oils from 80 to 67.5 per cent, and from 75 to 65 per cent for crude sunflower oil and from 85 to 75 per cent for refined sunflower oils.

The effective import duty on CPO will now work out to 67.6 per cent (60 per cent basic duty plus 2 per cent education cess on 60 plus 4 per cent special additional duty on 160), as against the earlier 78.2 per cent.

Likewise, the effective duty on refined oils would be 75.55 per cent (67.5 per cent basic duty plus 2 per cent education cess on 67.5 plus 4 per cent special additional duty on 167.5), from the earlier level of 88.8 per cent.

Moreover, since the duties are levied not on actual landed costs, but on the tariff values, the imported oil would be cleared at even lower rates. The tariff value on CPO has been frozen at $447 per tonne since July 31, whereas its landed (cost, insurance, freight) price is currently around $582 per tonne. The 67.6 per cent all-in-all import duty would then, in practical terms, be only 51.92 per cent.

"There was no need to reduce duties at this stage because the landed prices of CPO have come down from $602 to $582 per tonne since January, while falling from $728 to $682 per tonne in the case of crude, de-gummed soyabean oil. Also, it is not right to send bearish signals when the rapeseed-mustard crop is due for harvest in about a month's time," said Mr B.V. Mehta, Executive Director, Solvent Extractors' Association of India.

The Finance Ministry had, earlier on August 11, reduced the basic duty on crude palm oils from 80 to 70 per cent and from 90 to 80 per cent for refined palm oils. The move to effect a further cut this time had been vociferously opposed by the Agriculture and Food Ministry.

But as it happened in the case of the sugar export ban, ultimately the Finance Ministry's concerns over inflation took precedence over the views of the Farm Ministry.

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