The saga of controversies related to customs duty continues unabated in the edible oil and fat sector with the latest round of changes made by the government in import duties. Players in the sector were as divided as ever on the benefits and dangers of news levies on the politically senstive commodity.
The government has sharply hiked basic custom duty on vanaspati to 100 per cent from 30 per cent clearly to curb cheap import of vanaspati from Malaysia.
In contrast, import duty on imported refined palm oil and refined palmolein has been reduced from 92.4 per cent to 70 per cent.
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Industry sources point out that while the government has taken a pre-emptive action so that dumping of vanaspati from Nepal did not recur, it is also been viewed to deliver double benefits to domestic vanaspati manufacturers thanks to reduction of import levies on refined palm oil.
Edible oil refiners and processors were very upset with the decrease in the custom duty on imported refined palm oil and refined palmolein while maintaining the duty of crude palm oil and crude olein unchanged at 65 per cent.
With the duty difference between CPO (65 per cent) and palm refined (70 per cent) narrowing to just 5 percentage points, the Solvent Extractors Association of India points out that there is real danger that domestic vegetable oil processing industry would become unviable.
The refining industry has over the last three years made considerable investment in setting up modern processing units and related infrastructure. Larger inflow of finished goods will discourage new investment, reduce local value addition and render capacities idle.
Industry sources also questioned the timing of the decision to reduce duty on finished product as in about four weeks from now planting of kharif oilseeds would start. If large consignments of imported refined oils were released into the market, it would cause a price crash.
Depressed prices would erode growers