The Hindu Business Line : Palm oil import duty near to levels sought by ASEAN

Tariffs levied by India on palm oil imports have been a major stumbling block in the finalisation of a free trade agreement (FTA) with the 10-member Association of South-East Asian Nations (ASEAN).

While negotiations are currently on to clinch a deal before the targeted FTA launch date of January 1, 2008, there is still something in the interim for Malaysia and Indonesia to cheer about.

Price differential

Till August 11 last year, the effective import duty on crude palm oil (CPO) and olein worked out to 88.8 per cent, while adding up to 99.4 per cent for RBD (refined, bleached, de-odourised) palm oils. As against this, the tariffs on soyabean oil, both crude as well as refined, stood at 50.8 per cent. This differential was a sore point for the two ASEAN majors, whose palm oil competes with the soya oil supplied by Argentina, Brazil and the US.

However, since August 11, there have been five rounds of duty cuts on imported edible oils, necessitated by spiralling international prices and the Centre’s concerns over domestic inflationary pressures.

After the latest round of reduction from Monday, the effective duty on CPO and crude olein stands at 46.35 per cent. That makes it closer to the present 40 per cent level for crude de-gummed soya oil.

The tariffs on refined palm fractions have also come down sharply to 54.075 per cent, marking a lower gap vis-À-vis the 40 per cent levied now on refined soya oil. And all this has happened within the last one year!

The revised duty structure, industry sources say, would ensure the continued dominance of palm oil in the country’s imported vegetable oil portfolio.

During 2006-07 oil year (November-October) till June, palm oils (CPO, crude olein and RBD palmolein) accounted for 19.41 lakh tonnes (lt) out of the total imports of 27.49 lt. The corresponding share of soya oils was 6.57 lt.

Landed price

On Wednesday, the landed price of CPO (cost & freight, Mumbai) was quoted at $815 per tonne, below $877 for crude soya oil. Import duties on edible oils, unlike other commodities, are computed on ‘tariff values’ fixed by the Finance Ministry.

Taking the existing per tonne tariff value of $447 per tonne on CPO and $580 on crude soya, the duty-paid price of the former is now about $87 per tonne cheaper than the latter.

“Refineries do not mind paying more for soya oil as long as the cost differential over CPO is kept within $60 a tonne. Beyond that, soya oil loses out completely, despite its lower processing losses and better suitability for blending (reading adulteration) with groundnut and other oils,” the sources added.

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Palm oil import duty near to levels sought by ASEAN