Mixed response among coconut oil manufacturers on reduction of import taxes

Whether the reduction of import taxes on crude and refined palm oil from Asean nations affects the prospects of coconut and other edible oils in the domestic market? It is pointed out that the Centre's decision to reduce the duty difference between crude palm oil and palmolein from 10 to 5 per cent would pave the way for higher imports.

However, the government's move has evoked a mixed response especially among coconut oil manufacturers, who foresee that the decision would not going to have any immediate impact.

Thalath Mahmood, Director, Cochin Oil Merchants Association (COMA) told Business Line that the cheaper availability of palmolein in the domestic market is always a threat to coconut oil sector in Kerala, as it would lead to a gradual consumer shift due to price competitiveness. The palmolein consumption in Kerala is estimated at 3-4 lakh tonnes per annum, while coconut oil hovers around 3 lakh tonnes. The palmolein is selling at price of ₹70-80/litre, whereas the retail price of coconut oil was ₹200/litre.

However, he went on to add that the recent hike in minimum support price of copra has given the sector a hope that the coconut oil prices would not come down from a benchmark level and ensure a better price realisation. This would help stabilise coconut oil prices.

Highly placed sources in the sector also ruled out any impact on coconut oil in the short term in the wake of supply constraints of copra. This has led to an increase in coconut oil prices surpassing ₹200/litre. The hike in MSP rates would benefit copra prices from a drastic fall. Copra prices are likely to hover in the range of ₹100/kg with the starting of the season in March. However, the surging coconut oil prices may torpedo domestic consumption in the long term, as Kerala consumers always favours cheaper edible oils.

“Not only coconut oil but other edible oils will be impacted by the government's decision, affecting the prospects of oil seed farmers,” said Anand Menon, Consultant, Solvent Extraction & Animal Feed Manufacturing. Solvent extractors have already demanded the government to reduce the duties of crude palm oil and hike the rates of refined oil so that the domestic producers could utilise their idling refining capacity. The government's move would also discourage the palm cultivation in India which has been taken up under the Make in India programme, he added.

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