According to SEA, the reduction of the import duty difference between refined and crude palm oil has the potential to kill the domestic refining industry and has urged the Centre to again curb the import of refined palm oil and reinstate the earlier duty differential of 11 per cent between the two oils.
To keep edible oil prices, stable in the domestic market, the government reduced import duties on RBD palmole and RBD palm oil by 5.5 percent in December 2021.With this reduction, the import duty difference between refined palm oil and crude palm oil (CPO) was reduced to 5.5 per cent.
Usually, India, a major importer of edible oils, essentially buys CPO from the global market and refines it for the domestic market. But with the duty difference reduced between the two oils, traders are shifting to refined palm oils.
Mumbai-based Solvent Extractors Association of India (SEA) President Atul Chaturvedi wrote a letter to Union Food Secretary Sudhanshu Pandey in which they appealed strongly to the government to reinstate the duty differential of 11 per cent between crude and refined palm oil as was prevailing prior to December 20, 2021 by reducing the agri cess on CPO by 5 per cent. This would ensure a differential of 11 per cent in import levies between CPO and refined palm oil.
He also demanded that the government place the import of RBD palmolien and refined palm oil back under the restricted list with immediate effect or at least from April 1, 2022.
This will enable the domestic refining industry to have a level playing field and is in line with our Prime Minister’s vision of Make in India.
Chaturvedi said the duty differential between CPO (raw material) and refined palm oil (finished product), which was 11 percent earlier and has now been reduced to 5.5 percent, has the potential to destroy the CPO refining industry in the country. Further, buyers are shifting to refined palm oils as exporting countries like Indonesia and Malaysia levy higher taxes on CPO shipments than on refined palm oil, he added.
SEA fears that CPO imports in India would now be replaced with refined palmolien and our palm refining industry would be reduced to being mere ‘packers’seriously compromising heavy investments made in the industry.
“This situation needs to be corrected before investments turn sour and add to the nonperforming assets (NPAs) of lenders,” he said, adding that the current reduction in duty difference has come as a blow not only to the domestic palm oil refining industry but to oilseed farmers as well. For the first time in a long time, domestic oilseeds have started selling above the minimum support price (MSP) and improving farm incomes. He added that this step would be counterproductive and contrary to the stated objective of increasing domestic oilseed production.
The government in January 2020 placed RBD palmolien on the “restricted list” of imported items. However, later it was taken off the list to boost domestic supply and check retail prices. Its import is now permitted until December 2022.