India raises import tax on Malaysian refined palm oil by 5%

India has raised the tax on refined palm oil from Malaysia to 50 per cent from 45 per cent for six months to curb imports and boost local refining.

The world's biggest edible oil importer currently imposes a 40 per cent import tax on crude palm oil and 50 per cent on refined palm oils. But since January, shipments of refined palm oils from Malaysia have been taxed at 45 per cent, under an agreement with Malaysia.

This reduced the effective difference in duty between crude palm oil and refined palm oil from Malaysia for Indian refiners to 5.5 per cent from 11 per cent, making overseas buying of refined palm more lucrative.

Read more: 5% duty mooted on Malaysian palm oil imports

That led to a 727 per cent surge in Malaysia's refined palm exports to India in the first half of 2019 to 1.57 million tonnes compared with the same period a year before, according to data compiled by the Malaysian Palm Oil Board.

Mumbai-based trade body the Solvent Extractors' Association of India said rising shipments of refined palm oil hit local refiners and filed an application with the Directorate General of Trade Remedies for an investigation. The watchdog last week recommended raising the import tax on refined products.

Related news: Solvent Extractors Association asks to hike import duty on Malaysian refined palm oil

India said the 50 per cent duty on refined products would be applicable until March 2, 2020. The hike in duty on refined palm oil will prompt Indian buyers to switch to crude palm oil, said Sandeep Bajoria, chief executive of the Sunvin Group, a Mumbai-based vegetable oil importer. “Importing refined palm oil is no longer attractive. From October imports of CPO could rise and refined palm will go down,” he said.

India imports palm oil mainly from Indonesia and Malaysia. Indonesia traditionally claimed two-thirds of India’s palm oil imports, but in the first half of 2019 Malaysia surpassed Indonesia as biggest supplier to India due to the duty advantage.“Indonesia is likely to regain market share again in coming months. It provides crude palm oil more competitively than Malaysia,” said a Mumbai-based dealer with a global trading firm.

Also read: Malaysian palm oil output likely to be higher in 2019

Palm oil accounts for two-thirds of India's vegetable oil imports. New Delhi also imports soyoil from Argentina and Brazil and sunflower oil from Ukraine and Russia.