Palm Olein Import Tax Unlikely to Be Raised in India

India, the world's second-biggest user of cooking oil, will resist calls from local processors to increase tax on refined palmolein imports, as a plunge in the rupee makes overseas purchases abroad more expensive, according to two government officials.

The government will keep $484 a tonne as the base price for taxing imports at 7.5 per cent at least the next three months, said the officials, who have direct knowledge of the matter. An increase in the base rate would have raised the prices of imported oil, fuelling inflation, they said. The rate may be raised in the annual budget in February, they said.

India's rupee fell to a record 52.73 per dollar on November 22, on concern Europe's debt crisis would hurt demand for emerging market assets. The 14.6 per cent slump in the currency this year threatens to boost import costs, fueling inflation. The food price index has stayed above nine per cent for the last 16 weeks.

"If the current base price continues, refined oil imports will likely increase and hurt domestic refiners," said BV Mehta, executive director of the Solvent Extractors' Association of India, a grouping of processors. "Unfortunately, the government is more concerned about the food inflation."

The processors in September asked the government to increase the base price and import duty on refined palmolein after Indonesia, India's biggest supplier, cut export tax on refined palm oil and raised export duty on crude palm oil.

Food minister K V Thomas declined to comment. India set the base price for various cooking oils more than five years ago, while the actual cost of imported fats have surged, according to processors' group. Refined palmolein is imported at about $1,080 a tonne, while buyers need to pay tax only at $484 a tonne, it said. The benchmark prices, introduced to prevent traders from paying lower import duties by understating edible oil prices, are revised in line with international edible oil prices.