Large edible oil refining units set to gain

Oil refiners criticised the Union finance minister for failing to reduce excise duty on imported crude oil, which the industry had demanded.

However, large refiners like Adani Wilmar Limited (AWL), which also markets Fortune brand edible oil, backed the FM for hiking import duty on refined palm oil by 5 per cent to 75 per cent.

"As the FM has acted on the recommendations of the Tariff Commission and hiked the customs duty on refined palm oil, refiners will be able to utilise refining capacity better. This will encourage refineries," said B R M Rao, chief executive officer (CEO) of Gokul Refoils and Solvent Ltd. Gokul would soon be commissioning its 1000 tonne refinery at Kutch district in Gujarat.

The Tariff Commission had recommended a hike in customs duty on refined palm oil by 5 per cent to 75 per cent to protect domestic farming and refining of crude oil.

Angshu Mallick, general manager, marketing and sales of AWL, said the differential duty of ten per cent between imported crude oil and imported refined oil would help local industry and so would the increase in import duty on refined oil.

"The differential is now healthy," said Mallick. Adani has a 1000t refining unit at Mundra. AWL officials said the customs duty hike on import of crude would help more efficient, organised players. AWL was hiking capacity by 1200t by July-end.

Data released by Solvent Extractors' Association (SEA) indicated that in the seven months of November 2003 to May 2004, about 386,498t of refined palm oil was imported against total import of 10,69,108t of crude palm oil import.

However, refined palm oil imports in corresponding months of the previous year were only 11,862t and crude palm oil imports was at 10,89,995t.

A section of the refining industry felt the government could not have reduced excise duty because of other constraints and a 10 per cent differential in customs duty between crude and refined oil was adequate.

Refiners said norms for crude oil import were so stringent, it was almost as good as refined palm oil. This put refiners at a distinct disadvantage.

The Finance Bill proposed retained customs duty on crude palm oil at 65 per cent, and increased the duty on refined palm oil from 70 per cent to 75 per cent.

Gujarat Oil Refiners Association (GORA) said oil refining industries were on the verge of closure because of excise duty. Refining units faced problems because of high excise duties, which should be eliminated.

GORA asked the finance minister to raise the duty difference to 25 per cent between imported crude oil and refined oil. This difference would ensure import of only essential oils.

"The issue of excise has been totally untouched by the Finance Minister. In addition, matters have actually been made worse as the norms for importing crude oil at 65 per cent import duty are too stringent. The beta beta carotene value of crude palm oil should be between 500 and 2500mg per litre, which is not the case and so we effectively import crude palm oil at 70 per cent import duty," said a member of GORA.

The industry paid excise of Rs 1000 per metric tonne on refined oil and an excise of Rs 1250 on vanaspati. With the two per cent educational cess, this would increase by around Rs 20 per metric tonne, said refiners.