Tariff value hike of palm group of oils rolled back

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Centre `corrects' notification', leaves trade in confusion

M.R. Subramani

Chennai, Aug. 15

The Union Government has rolled back the hike in tariff value of palm group of oils, fearing it may fuel inflation.

On Monday, the Central Board of Excise and Customs (CBEC) had hiked the value by $28-34 a tonne based on the average of landed prices that prevailed during the last fortnight. It would have resulted in landed price of palm group of oils going by about Rs 1,200 a tonne. The revised value was issued as "Notification No. 88/2006-Customs (N.T.)".


But late on Monday night, the Centre "corrected" the "notification" (see Table), wherein crude palm oil's tariff value was restored to $447 a tonne from $481 and that of RBD palmolein to $484 from $512. It still, left the hike in crude soyabean oil unchanged at $572.

An official press release said: "It has, however, come to notice that the tariff values indicate a substantial increase, based on a significant rise in the international prices. On crude palm oil, the rise has been up to 7.6 per cent compared to the last fortnight. The Board, therefore, decided to retain tariff values of palm oil products at the prevailing rates notified in Notification NO. 85/2006-Customs (N.T.) dated 31st July, 2006."

The roll back reported after the Finance Minister, Mr P. Chidambaram, met the Prime Minister, Dr Manmohan Singh, on Monday evening and apprised him of the development. The Prime Minister had disapproved of the raise in value, leading to the status quo with regard to palm oil products.


The flip-flop, however, left the trade fuming and in confusion.

"The Government is not under any obligation to revised the tariff value every fortnight. It has maintained such a stand before. It could have done this time too, instead of making a mockery of the system," an edible oil industry official said.

The tariff value system was introduced on August 3, 2001 to prevent any under-invoicing of imported vegetable oil consignment. But both the previous National Democratic Alliance and the current United Progressive Alliance Governments have many a time skipped revision of the tariff value, particularly when the global prices tended to decline.

"Apparently, then the Centre wanted to earn more Customs duty. And now, it thinks containing inflation is more important than protection to the domestic industry," an analyst said.

What, however, upsets the edible oils trade on Tuesday was that it was left holding two notifications; unclear which one of it was valid (see box).


Some traders even thought that the CBEC's Web site had been hacked and were not prepared to trade. Finally, it was the official press release issued around 3.15 p.m. that made things clear.

"We are finding it hard to adjust to the developments that have taken place since the weekend. Before we could adjust to the first development, came the hike in tariff value and then, the roll back," the industry said. On Friday, the Centre, in an effort to rein in rising edible oil prices, cut the Customs duty on crude palm oil to 70 per cent from 80 per cent and that of RBD palm oil and palmolein to 80 per cent from 90 per cent.

Landed cost

With the roll back in the tariff value, the landed cost of crude palm oil will now be Rs 38,175 a tonne - the same as it was after the Centre cut the Customs duty. For RBD palmolein, the landed cost will be Rs 42,800.

Trade sources said some buyers could have incurred loss during the period between the revision and its roll back but they were unable to pinpoint what exactly the loss could have been.

In Kuala Lumpur, crude palm oil prices slipped to $446.2 from $448 but traders expect the prices to bounce back on demand, particularly from Europe.

(This article was published in the Business Line print edition dated August 16, 2006)
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