 "Veg oil refineries plead for protection from cheap imports")
The country’s vegetable oil refineries are dying due to a faulty inverted duty structure on import, said Dorab Mistry, director, Godrej International.
On the sidelines of Palm Night, an event organised by the National Commodity & Derivatives Exchange on the occasion of its Crude Palm Oil (CPO) futures launch, he said: “While the governments of Indonesia and Malaysia are protecting their own refineries with a favourable export duty structure, the Indian government did not respond. The industry has made several representations in recent months to raise the differential duty (between import of crude and refined oil) to a comfortable level of 7.5-10 per cent.”
With the recent imposition of 2.5 per cent import duty on CPO, the differential has narrowed to five per cent, as the import duty on refined oil works out to 7.5 per cent. The government of Indonesia, from where India imports most of its CPO, raised the export duty on the latter to 12 per cent for December from nine per cent the previous month, as against three per cent on refined oil (refined, bleached and diodised or RBD).
Consequently, around two million tonnes of Indian edible oil refinery capacity, equivalent to 11 per cent of installed and around 25 per cent of operating capacity, faces a closure threat, he said, as import of refined oil becomes much cheaper than crude oil.
The industry says about Rs 20,000 crore of investment went in to build 18 mt of refining capacity in the sector. Yet, only 48 per cent of average capacity is being utilised, as India is importing up to 8.5 mt of CPO for refining locally. In the peak demand season, capacity utilisation goes up to 60 per cent but falls to 30 per during the lean period. It has dipped well below even this for many months, due to the increased import of refined oil from Indonesia and Malaysia, the world’s two largest vegetable oil suppliers.
“The government is unlikely to take any action before the next Lok Sabha election, amid fear of a further rise in food inflation which has already worried the government. Hence, the refineries are steadily moving towards closure,” said Dinesh Shahra, chairman, Ruchi Soya Industries.
Edible oil prices remained under severe pressure this year. The trend is unlikely to reverse until March 2014, says the industry, turning many small crushing, refining and packaging units into a sick state.
On the sidelines of Palm Night, an event organised by the National Commodity & Derivatives Exchange on the occasion of its Crude Palm Oil (CPO) futures launch, he said: “While the governments of Indonesia and Malaysia are protecting their own refineries with a favourable export duty structure, the Indian government did not respond. The industry has made several representations in recent months to raise the differential duty (between import of crude and refined oil) to a comfortable level of 7.5-10 per cent.”
With the recent imposition of 2.5 per cent import duty on CPO, the differential has narrowed to five per cent, as the import duty on refined oil works out to 7.5 per cent. The government of Indonesia, from where India imports most of its CPO, raised the export duty on the latter to 12 per cent for December from nine per cent the previous month, as against three per cent on refined oil (refined, bleached and diodised or RBD).
Consequently, around two million tonnes of Indian edible oil refinery capacity, equivalent to 11 per cent of installed and around 25 per cent of operating capacity, faces a closure threat, he said, as import of refined oil becomes much cheaper than crude oil.
The industry says about Rs 20,000 crore of investment went in to build 18 mt of refining capacity in the sector. Yet, only 48 per cent of average capacity is being utilised, as India is importing up to 8.5 mt of CPO for refining locally. In the peak demand season, capacity utilisation goes up to 60 per cent but falls to 30 per during the lean period. It has dipped well below even this for many months, due to the increased import of refined oil from Indonesia and Malaysia, the world’s two largest vegetable oil suppliers.
“The government is unlikely to take any action before the next Lok Sabha election, amid fear of a further rise in food inflation which has already worried the government. Hence, the refineries are steadily moving towards closure,” said Dinesh Shahra, chairman, Ruchi Soya Industries.
Edible oil prices remained under severe pressure this year. The trend is unlikely to reverse until March 2014, says the industry, turning many small crushing, refining and packaging units into a sick state.