The finance ministry has proposed to revise the tariff rate for imported edible oil shortly, after almost six years of freezing it at $ 420 per tonne.
According to officials close to the development, the rate will be linked to the market to align it with international prices. The rate hike is likely to be effected primarily for palm oil, which is mainly imported into India.
Tariff rate is the base rate upon which custom duty is charged on imports. The officials, however, cautioned that it will not have any impact on the crude or raw edible oil imported since customs duty on this category is zero. It will only have an impact on the import of refined palm oil to the extent of 7.5 per cent of the total value.
| DATA CARD Import of veg oil (tonnes) | |||
| Month | 2010-11 | 2011-12 | Change (%) |
| Nov ‘11 | 6,68,917 | 8,55,363 | 27.87 |
| Dec ‘11 | 7,52,688 | 6,69,912 | -10.99 |
| Jan ‘12 | 7,21,179 | 6,59,979 | -8.49 |
| Feb ‘12 | 5,49,881 | 8,76,669 | 59.43 |
| Mar ‘12 | 4,35,735 | 7,27,706 | 67.01 |
| Apr ‘12 | 4,75,123 | 9,25,334 | 94.75 |
| May’12 | 6,64,133 | 8,93,921 | 35.05 |
| Jun ‘12 | 8,62,550 | 7,83,315 | -9.18 |
| Source : SEAI | |||
As per data compiled by the Solvent Extractors’ Association of India (SEAI), share of refined oil ( RBC palmolein) has increased to 19 per cent in June, while crude oil has decreased to 81 per cent and reported at 5.047 million tonnes (mt) compared to 4.31 mt during corresponding period of previous year.
Further, the SEAI report is of the view that the share of RBD palmolein is likely to increase as current Indonesian inverted duty structure encourages larger export of refined oils (nine per cent export duty) over crude oil (18 per cnet export duty). Also, the gap between cure and refined palm oil has reduced to just $28 from $73 a year back, discouraging local refining.
Explaining this, officials said the tariff rate may be hiked to around $900-1000 per tonne which would translate into a duty of around $35-40 per tonne. In rupee terms, the increase in tariff value at the current exchange rate will translate into a duty of Rs 1,800-2,200 per tonne. Earlier the ministry of food had recommended for increase in import duty of refined oil.
According to officials, edible oil prices are already high in the retail market, as around 50 per cent of the demand has to be met by imports. Indonesia, from where a majority of the edible oil is imported by India, has raised the duty for export of both crude and processed refined palm oil.
However, the increase in export duty on crude oil is much more than the rise in duty on processed or refined oil, which is why Indian importers are preferring import of refined oil.
Import of vegetable (edible and non edible ) oil declined in June by 9.18 per cent due to traders’ shifting from fresh purchases to use existing inventory.
During November 2011 to June 2012, import of refined oil (RBD palmolein) nearly doubled to t 1.21 mt, compared to 638,715 tonnes in the same period the year before.
Besides, the drastic depreciation in the rupee against the dollar has proved as a barrier for import of veg oil into India. The rupee averaged at 55.94 against the dollar in June 2012, compared to 44.81 in the corresponding month of the previous year.
Meanwhile, traders opted to use more quantity from the existing inventory instead of focusing on fresh purchases. Consequently, the overall stocks in the pipelines declined to 1.5 mt as on July 1 compared to 1.56 mt about a month ago, SEAI report suggested.
