In the first five months of the current oil year (November 2011–October 2012), import of refined oil shot up 78 per cent, posing a threat to domestic edible oil refiners. This rise in import is the result of the inverse export duty structure in Indonesia, the world’s largest producer and exporter of palm oil. The government of Indonesia charges 18 per cent export duty on crude palm oil to discourage its shipment from the country. However, export duty on refined, bleached and diodised (RBD) palmolein is much lower at nine per cent in Indonesia.
Data compiled by the Solvent Extractors’ Association (SEA) of India showed overall imports in the first five months (November 2011–March 2012) of the current oil year shot up to 0.82 million tonnes, compared to 0.46 million tonnes in the corresponding period of the previous year. This represents 21 per cent of the overall vegetable oil imports during the period under consideration, compared to 15 per cent in the same period last year.
Rising imports of refined oil would result in lower activity in domestic refineries, as RBD palmolein is an edible grade oil and requires no further processing. RBD palmolein is used directly for packing and blending with other refined oils, including rape / mustard oil and soybean oil.
The import of crude oil, however, rose a mere 12.5 per cent during November 2011–March 2012, to 3.71 million tonnes. The share of crude oil in overall vegetable oil imports, however, has declined to 79 per cent from 85 per cent in the same period last year.
Overall vegetable oil imports, therefore, during the November 2011–March 2012 period, has recorded a rise of 21 per cent to 3.79 million tonnes, compared to 3.13 million tonnes in the same period last year.
According to the Central Organisation for Oil Industry & Trade (COOIT) Chairman, Laxmi Chandra Agarwal, there could be two solutions to the issue. First, the government must revise tariffs (the base price for calculating import duty), was fixed seven years ago at $484 a tonne for crude palm oil, and make it market-linked. Since, as the price of crude palm oil shot up to around $1,250 a tonne, the tariff must be revised accordingly. While this will marginally raise the price of edible oil, it will protect the interests of domestic refineries.
Second, a rise in customs duty would help. The import duty was fixed at ‘nil’ on crude palm oil and 7.5 per cent on refined oil a few years ago to control inflation.