Why the soap industry is seething

G Chandrashekhar | Updated on January 22, 2020

The Indian soap industry is upset that the powerful palm oil import lobby is meddling with its raw material import sourcing options. This follows a representation the palm oil import lobby has made to the government to impose customs duty on imported crude palm stearine (CPS) and palm fatty acid distillate (PFAD), key inputs for making soaps, soap noodle etc.

Both CPS and PFAD are currently allowed for import under ‘actual user’ condition and attract import duty of 7.5 per cent ad valorem. Palm oil importers have represented to New Delhi (copy of which is in possession of Business Line) that import duty on these key raw material for the soap industry should be the same as applied on crude palm oil (CPO) which is 37.5 percent ad valorem. As is well-known, CPO is refined to produce refined palm oil, a cooking medium.

In other words, the palm oil import lobby has demanded that customs duty on byproducts or downstream products of CPS and PFAD should be the same as the main import product, CPO.

According to the representative of a soap major (who desired anonymity), it would be absurd to impose the same rate of customs duty on import of the basic product (CPO) as well as on its byproducts (such as CPS and PFAD). “The palm oil import lobby is at it again, making a mockery of basic tenets of fiscal impost,” he fumed.

By demanding that both basic product and byproduct must bear the same rate of import duty, it appears that the palm oil import lobby wants to make the domestic soap and soap noodles industry entirely dependent on the former for sourcing its key inputs.

Byproduct disposal

Both CPS and PFAD are byproducts that are incidental to refining of crude palm oil and constitute roughly a fifth of the original product. India is the world’s largest importer of CPO with annual import volume of 70 lakh tonnes. Refining of this quantity generates around 14 lakh tonnes of byproducts.

There are serious issues with such large-scale import and refining of CPO. The challenge is the safe disposal of the byproducts of refining. It is no more a secret that the byproducts of CPO refining are used surreptitiously for blending in edible oil or disposed of in a manner that can compromise food safety and consumer health. There has been little surveillance over the disposal of the byproducts of CPO refining.

Indeed, given the challenge of byproduct disposal, it would make sense for the country to import less of CPO and more of refined palm oil, observed a key functionary in the market.

Health safety concerns

With restriction placed on import of refined palm oil, more and more of CPO will be imported into the country which in turn is sure to create serious food safety and consumer health issues. This is best avoided.

Given that soaps are considered an essential product of daily use, any increase in soap prices would be detrimental to consumer interest. “There is a case for allowing duty-free import of key inputs like CPS and PFAD under actual user conditions,” said an industry official.

The writer is a policy commentator and commodities market specialist. Views are personal

Published on January 22, 2020

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