REVISION OF IMPORT DUTY BY INDIA
On 24 January 2007, the Indian Government announced the cut on import duties of palm oils and sunflower seed oils. Customs duty on refined palm oil was cut by 12.5 percentage points, while that on crude palm oil by 10 percentage points. Import duty on soybean oil remains unchanged at 45 percent. The import duty cut, however, has been accompanied by a freeze in base import prices on which the duty is being calculated. The new revision is indicated in the Table 1.
Table 1 : Revision of India Import Duty as Announced on 24 January 2006
|
New Duty |
Previous Duty |
Crude Palm Oil (CPO) |
60% |
70% |
Crude Palm Olein (CPL) |
60% |
70% |
Other Crude Edible Oil for Vanaspati & Refiners |
90% |
90% |
Vanaspati (Hydrogenated Fats) |
80% |
80% |
Refined Palm Oil (RBD PO) |
67.4% |
80% |
Refined Palm Olein (RBD PL) |
67.4% |
80% |
Crude SFO |
65% |
75% |
Refined SFO |
75% |
85% |
The reduction was anticipated in view of the expected shortage in supply of oils for the 2006/07 season. India oilseed production is expected to decline by between 2.5 – 3.0 million metric tonnes this season, which can be translated into a reduction of vegetable oils supply by 300,000 - 500,000 tonnes. The country would still import large volumes of edible oils due to rise in population and household income.
The current high international prices are also adding pressure at the consumer level. Inflation rate is currently estimated at 6%, and the higher vegetable oils prices are adding extra burden to the consumers as they are already paying higher prices for essentials food items including edible oils. The Indian oilseeds industry opposes such a move (i.e. reduction of import duty) on the basis that this will encourage greater imports and cause prices of domestic oilseeds to fall. However, the Government has little choice but to intervene and cut the import duty in ahead of its Budget on February 28, to ensure the mass consumers are not burden by the higher inflation rate.
The restructuring of India's edible oil import duties and the latest bearish forecast in the country's oilseeds output are expected to change the dynamics of global vegetable oils trade, and may give a major boost to palm oil imports.
The import duty reduction is positive for palm oil as this will encourage more palm oil imports into the country by virtue of its competitive prices. With tariff rate values frozen, it is expected that the reduction will bring down the landed price of palm oil by US$35 – US$45 per metric tonnes.
Table 2 : Effective Import Duty on Palm Oil into India
Product |
Basic Duty |
S.A.D |
Edu. |
CVD |
Effective Duty |
Crude Palm Oil (CPO) |
60% |
4% |
2% |
Nil |
67.6% |
Crude Palm Olein (CPL) |
60% |
4% |
2% |
Nil |
67.6% |
Vanaspati (Hydrogenated Fats) |
80% |
4% |
2% |
Nil |
88.8% |
Refined Palm Oil (RBD PO) |
67.4% |
4% |
2% |
Nil |
75.6% |
Refined Palm Olein (RBD PL) |
67.4% |
4% |
2% |
Nil |
75.6% |
Crude Sunflower |
65% |
4% |
2% |
Nil |
72.9% |
Refined Sunflower |
75% |
4% |
2% |
Nil |
83.5% |
One of the other effects of the cut in customs duty will be the reduction of the tariff differential between palm oil and soybean oil. Palm oil is expected to gain competitiveness in relation to soybean oil, as the duty difference between crude palm oil and soybean oil will be narrowed considerably, thus encouraging preference for palm oil imports at the expense of soybean oil.
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