Duty cut won't impact sunflower oil market

BUDGET IMPACT

The move of a huge 15 percentage-point cut in the customs duty on crude and refined sunflower oil is unlikely to have a huge impact on its imports.

According to the Solvent Extractors Association of India (SEA), edible oil makers across the country currently utilise only 66 per cent of the permitted quotas on crude sunflower oil under the tariff regime quota (TRQ) system. This is despite having a preferential duty structure of 50 per cent under the TRQ, while the customs duty is 65 per cent on crude sunflower oil.

Bharat V Mehta, executive director, SEA, said under the TRQ, 1.5 lakh tonne of crude sunflower oil was permitted for imports. However, domestic manufacturers, at present, import about 1 lakh tonne of sunflower oil every year. This means crude sunflower oil imports account for a mere 2 per cent of the total imports of 50 lakh tonne of edible oils.

"In view of the reduction of duty on crude sunflower oil to 50 per cent, the duty under general imports and under the TRQ is on par at 50 per cent. Hence, the cut will not have much impact on the quantum of sunflower oil imports," Mehta said.

However, players in the branded edible oil category were optimistic.

According to Dinesh Shahra, managing director, Ruchi Soya, sunflower oil is the preferred oil for cooking. Hence, any price advantage on that front would ensure that customers graduated to sunflower oil, he said.

Price cuts were a possibility, but it was early to comment on the exact nature of price cuts, Shahra added. At present, a one-litre pack of sunflower oil costs Rs 85, while a five-litre can costs Rs 450. In comparison, a litre of soya oil costs Rs 68, while a five-litre can costs Rs 365.

Branded players in the domestic edible oil sector are expected to benefit from other sops such as a cut in the additional customs duty and the withdrawal of excise on food processing.

Even the cut in duty on plastic is expected to help the branded players, as it will reduce packaging costs.

The country is the second-largest importer of edible oils in the world. In the 12-month period ending September 2007, its imports are expected to rise 33 per cent, according to a study by the US government.

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NOT IN FULL BLOOM

Edible oil makers across the country currently utilise only 66 per cent of the permitted quotas on crude sunflower oil under the tariff regime quota (TRQ) system

This is despite having a preferential duty structure of 50 per cent under the TRQ, while the customs duty is 65 per cent on crude sunflower oil

Under the TRQ, 1.5 lakh tonne of crude sunflower oil was permitted for imports

Crude sunflower oil imports account for a mere 2 per cent of the total imports of 50 lakh tonne of edible oils