Commodities

Free import of refined oil will kill domestic industry: Solvent extractors

Our Bureau Mangaluru | Updated on July 06, 2021

In letter to Consumer Affairs Minister Piyush Goyal, they said unhindered imports will send the wrong signal to investors

Requesting the Government to withdraw its decision to freely allow the import of RBD palmolein and RBD palm oil, the Solvent Extractors’ Association of India (SEA) has said such a decision would kill the domestic refining industry and will have serious repercussions on farmers.

In a letter to Union Minister for Consumer Affairs, Food and Public Distribution, and Commerce and Industry Piyush Goyal, SEA President Atul Chaturvedi said: “The ‘opening up’ by freely allowing import of RBD palmolein and RBD palm oil will have serious repercussions for both domestic refiners and farmers as this will have a dampening effect on the prices of domestic oilseeds. Also, refined oil import will surely send the industry to the door of bankruptcy as we have seen in the past with so many refineries.”

The Directorate-General of Foreign Trade (DGFT) had placed the import of RBD palmolein and RBD palm oil under the ‘Restricted List’ from January 8, 2020. SEA said this decision greatly helped domestic edible oil refiners to increase their capacity utilisation by processing larger quantities of crude palm oil (CPO).

Import of RBD palmolein dropped from 27.3 lakh tonnes during the oil year November-October 2018-19 to 4.21 lakh tonnes in the corresponding period of 2019-20, and hardly 21,000 tonnes arrived in India during November-May of the oil year 2020-21.

‘DOMESTIC INDUSTRY HURT’

The decision to place refined palm oils in the restricted list in the past one-and-a-half-years had incentivised more investors in the industry. He said the recent action of the Government to freely allow imports will send wrong signals to the investors.

Indonesia’s levy and export duty on CPO is $291 a tonne from July 2, while that on RBD Palmolein (the finished product) is only $187 a tonne. This gives added advantage to Indonesian refiners, who sell RBD palmolein and RBD palm oil at a much lower price, even below CPO. This will seriously hurt domestic refiners. The export duty on CPO is $90 a tonne in Malaysia against nil on refined palm oil.

He said the DGFT notification will also open the flood gates for import of refined oils from Nepal and Bangladesh under the SAFTA agreement at nil duty, creating havoc in the market as domestic producers will not be able to compete with these oils imported at nil duty and refiners in northern and eastern India will suffer heavily.

Allowing free import of refined palm oils will not bring down prices, but will kill the domestic industry, he said, adding inflation in edible oils was on account of higher international prices plus higher import duty in India by continuous increase in tariff values.

Stating that the veg oil refining industry in India is operating at hardly 50 per cent capacity, he said the margins are minimal because of the stiff competition. “By this action, it seems that the Government is penalising the refining industry for no fault of theirs,” he said.

FARMERS

Chaturvedi said the Government’s concern about the inflationary impact of high edible oil prices maybe a little misplaced. The weightage of edible oil in WPI is only 2.64293 per cent and should not cause undue alarm. “Even assuming that there is inflation in veg oil prices, the Government needs to balance the interest of farmers and consumers. High veg oil prices have been a blessing in disguise and would definitely attract more acreage in oilseed cultivation, which is critical for reducing the dependence on imports,” he said.

Stating that the prices of vegetable oils have fallen by 25 per cent in the last two months, he said prices today are equitable from both the consumer as well as the farmer’s angle, and there should be no concern due to veg oil prices at this juncture.

‘PRICES TO FALL’

Quoting a projection made by the international publication -- Oil World – he said the prices of vegetable oils are likely to go down in the second half of 2021 due to higher global production of oilseeds by 34 million tonnes. There will be an increase in availability of vegetable oils by 10 million tonnes in the world market.

This will definitely soften the price of edible oils in the international market and in India in the coming months, and it is evident that both international and local prices have already declined by 25 per cent in the last two months, he added.

Published on July 05, 2021

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