Indonesia Cuts Refined Oil Export Duty Vegetable Oil Firms to Be Hit

Faced with a cut in export duty of refined oil by Indonesia, the Indian vegetable oil importers have urged the government to intervene for protection of local refinery and packaging units.

Effective September 15, the government of Indonesia has raised export duty on crude palm oil (CPO) to 16.5 per cent from 15 per cent earlier and, cut the same on refined, bleached and diodized (RBD) palmolein bulk and consumer pack to eight per cent and two per cent, from 15 per cent and 10 per cent, respectively.

The decision will affect domestic vegetable oil refinery and packaging units badly and hundreds of thousands of workers associated with these will be out of job. India imports over 60-70 per cent of the overall nine million tonnes CPO from Indonesia.

Due to low value ($84 a tonne) fixed by the government for the purpose of levy of import duty, as against the current import price of $1,200 a tonne, the actual duty being levied on imported refined oils comes to around three per cent. This makes the import of refined edible oil more competitive than crude edible oil, which has already affected the refining industry.

The Solvent Extractors' Association (SEA), the apex representative body, has written to the Minister of State for Consumer Affairs, Food & Public Distribution K V Thomas, seeking his immediate intervention. The Indonesia government wants to discourage export of CPO and encourage that of refined palm oil to generate more employment opportunities in the local market.

SEA argued the differential duty should be at least 7.5 per cent to make import of crude oil viable. Higher duty on CPO will encourage importers to procure refined oil, which needs no further processing, resulting in escalation in trade activities. In this case, the domestic value addition sector will die.

Understandably, the Tariff Commission of India has also justified the minimum duty difference between refined and crude edible oils to be at least 7.5 per cent.

Traders demand levy of the 16.5 per cent duty on import of refined edible oil, same as the export duty being levied on crude palm oil by the Indonesia. Also, the government should increase the tariff value on the refined edible oils to $1200 per tonne, in line with the current market price and issue a complete ban on the import of edible oils in consumer packs.