Agri Business

Indians pay over 60 per cent in taxes on palm oil

T V Jayan New Delhi | Updated on May 16, 2021

This file picture taken on December 2011 shows harvested palm oil fruits at a plantation in Medan   -  AFP

The burden for the consumer has increased further with India raising the tariff rate

Indian consumers are paying ₹60 in taxes and levies for buying palm oil worth ₹100 with Indonesia, from where India imports much of its palm oil, increasing its export tax further in May.

According to market reports, Indonesia increased its export tax on crude palm oil to $144 per tonne in May from $116 per tonne in April. Besides, its export levy too went up significantly higher from $55 to $255 per tonne early this year.

“Between Indonesia and India, export and import taxes tantamount to 60 to 62 per cent,” Sudhakar Desai, President of Indian Vegetable Oil Producers Association (IVOPA) told BusinessLine. According to Desai, taxes on palm oil in Indonesia alone is nearly $400 per tonne. India, on the other hand, charges 35.75 per cent as customs duty and cess on crude palm oil.

The burden for the consumer has increased further with India raising the tariff rate or the base price on which it imposes Customs duty by five per cent.

On Thursday, the Central Board of Indirect Taxes and Customs revised its fortnightly tariff value of many imported items, including different edible oils, gold and silver. The tariff of all major edible oils barring crude soyabean oil went up by $56 per tonne. While the tariff of crude palm oil went up to $1,219 per tonne from $1,163, that of refined palm oil is now costly by $56 at $1,242 per tonne.

“The tariff is a reflection of market price. It is bound to change every fortnight,” said Sandeep Bajoria, CEO of Mumbai-based Sunvin Group.

“The tariff increase may be in line with the market, but since the tariff changes are huge, they could disturb the trade flow and trade planning,” Desai said. “Since the prices have risen so much, it is creating a working capital crunch across the entire distribution channel,” the IVOPA President said.

Lockdown impact

Due to lockdowns, which are in force in many States across the country, Industry is feared to face both volume pressure as well as margin pressure, Desai said, adding that this was mainly because of the HoReCa (Hotels, Restaurants and Catering) segment which is expected to witness 10 to 15 per cent low demand.

During the first half of Indian oil year (November to October), India imported nearly 6.29 million tonnes of edible oil, around 3.88 million tonnes of palm oil alone. With global edible oil prices going north, retail prices of most edible oils have almost doubled in the country.

Though there are concerns over inflation, the Centre has problems in reducing import duty since it invariably favours exporting nations such as Indonesia and Malaysia, while Indian oilseed growers are hurt by any cut in the duty.

Of the nearly 14.5 million tonnes of edible oils that India imports annually, palm oil makes about 60 per cent. Apart from Indonesia, Malaysia also imposes eight per cent export duty on crude palm oil. Indonesia and Malaysia levy export duty on export of crude oil to encourage their domestic industries.

Published on May 16, 2021

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