Indonesian Palm Oil Duty Change Puts Indian Refiners in A Spot

 
A move by Indonesian Government to encourage local oil industry poses indirect threat to palm oil farmers and Indian refineries. It drastically increased export duty on crude palm oil, while significantly reducing duty on refined oil.

Though it would mean cheaper oil for consumers, it would lead to two major problems.

While gradually killing the Indian refined industry, it could as well pose major health risks for consumers, Solvent Extractors Association of India has alleged.

Chances of increase in carcinogenic elements are far higher as time-to-consume goes up as the refined oil takes much time to reach Indian consumer after it is refined in Indonesia, Mr Sushil Goenka, President of the Association, told Business Line.

Indonesia Move

The duty on CPO (crude palm oil) and RBD palmolein (refined, bleached deodorised or finished product) was uniformly at 15 per cent in Indonesia.
The new policy, effective from September 15, imposes duty on CPO at 16.5 per cent while export duty on RBD palmolein has been reduced to 10 per cent on palmolein in bulk and 2 per cent in consumer packs.

"This duty differential, between CPO and RBD Palmolein, will encourage the Indonesian refineries to export refined RBD palmolein," the association feels.

"Ministries of Health, Commerce and Finance in India seem to be wedded with the idea of providing cheaper oil. We are building a strong case for imposing higher duty on import of refined oil. We hope that the Government would rise to the occasion," Mr Goenka said.

"Large-scale import of RBD palmolein will be detrimental to the interests of domestic refiners. This might lead to decline in their capacity utilisation and, then, to their closure gradually," he said.

The domestic turnover of vegetable oil industry is pegged at Rs 1,00,000 crore, while import-export turnover stands at Rs 50,000 crore. This includes import of Rs 35,000 worth edible oils and export of Rs 15,000-crore worth oilmeals, castor oil and groundnut oil.

Revising Tariff

"In order to counter this situation, we have asked the government to revise the tariff value to match current market prices and raise import duty on RBD palmolein to 16.5 per cent from 7.5 per cent."

The figure 16.5 per cent is because it would match the export duty on crude palm imposed by Indonesia last month.

The oil industry also wants the Government to completely ban import of edible oils in consumer packs.