The notification issued by the Central Board of Excise and Customs raising the tariff value for refined bleached deodourised (RBD) palmolein to $1,053 a tonne following pressure mounted by the domestic refining industry to mark the tariff value to market price makes strange reading.

Why has the tariff value on RBD palm oil been left untouched at $476 a tonne?

Admittedly, it is only RBD palmolein that has been flowing into the country and the industry representations too sought a hike in tariff value only on it. About 12 lakh tonnes of the oil were imported in the first eight months of the oil year beginning November.

The effect of the notification is that Indian importers will pay customs duty at the rate of 7.5 per cent on $1,053 which comes to about $79 a tonne, a little over double of duty levied earlier.

What is likely to happen now is that traders will begin to import RBD palm oil which is slightly cheaper than its olein counterpart and end up paying customs duty on the extant low tariff value.

Not only that, principal supplier Indonesia is sure to reduce its refined palmolein price by an amount corresponding to the hike Indian importers will pay, that is about $44 a tonne. So, in effect the benefit may be short-lived for the domestic market.

It is unclear whether the omission of a hike in tariff value on RBD palm oil was by design or by accident. The domestic vegetable oil market had in any case already factored in the tariff value hike for refined palmolein.

(This article was published on August 1, 2012)
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