Increasing import of refined oil is posing a serious threat to domestic edible oil refineries, thereby jeopardising new investments of about Rs 10,000 crore in the sector.
In February, the total import of refined, bleached and diodised (RBD) palmolein was recorded at 250,000 tonnes, compared to an average 110,000 tonnes a month of arrivals in the first three months of the current oil year (November 2011-October 2012).
“The surge in import is hitting the domestic refineries, who have built up massive capacities over the last several years. If the trend continues for long, it would result in shutdown of domestic refineries,” said Sushil Goenka, president, Solvent Extractors’ Association (SEA), the apex trade body of the vegetable oil industry.
The huge surge in import of refined palmolein is seriously affecting the working of the domestic industry. To protect the industry from this issue, SEA has urged the government to levy market-linked import duty or raise tariff value to $1,200 a tonne.
The rate of import duty was fixed in tandem with the market price five years ago. Despite over 150 per cent increase in the basic price, the import duty is collected on the basis of old tariff rates. The tariff value of RBD palmolein was fixed over five years ago at $484 a tonne, compared to the prevailing price of $1,130 a tonne. Hence, the actual duty being levied on imported refined oils worked out to around three per cent only, thus making the import of refined edible oils more competitive than crude edible oils.
Additionally, SEA has also sought 16.5 per cent import duty, similar to that levied by the Indonesian government. India imports maximum edible oils from Indonesia.“Edible oil import in consumer packs should immediately be banned,” said Goenka.
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The non-revision of tariff value is denying the industry the duty difference between crude palm oil and refined palmolein, as recommended by the Tariff Commission. The duty differential of 7.5 per cent between crude and refined oil was relevant before the Indonesian government revised their duty structure on export of palm products.
Under the new plan, Indonesia has introduced an export duty of 16.5 per cent on crude palm oil (CPO) against eight per cent on bulk palmolein and two per cent on packed palmolein. The trade body said that in view o f this development, there is an urgent need to increase the duty on RBD palmolein to 16.5 per cent, ban the import of packaged palmolein and bring the tariff value in line with current prices.
India has a refining capacity of more than 12 million tonnes (mt) per annum at its ports itself, which is being expanded by an additional three mt. Against this, India imports seven mt, thus, utilising only 60 per cent of its total capacity. The low tariff value on refined edible oils has resulted in increased import of about one mt of refined edible oils. Closure of the refining industry will jeopardise the lives of over 500,000 workers and investments of Rs 10,000 crore.
The basic aim of the Indonesian government in implementing the new duty structure is to encourage setting up new refining and packing industries there inorder to generate more employment opportunities. Indonesia is aiming to add value and to earn more revenue through local taxes, as many more allied industries will be set up for manufacturing packing material, etc. However, this will lead to closure of Indian edible oil units.