Govt cuts import duty on palm, soyoil

The government today cut the import tariff value, the base price at which import duty is levied, on palmoils to $397 a tonne from $423 and crude soyoil to $506 a tonne from $558.

The government fixes base prices to calculate customs duties to prevent the loss of revenue due to under-invoicing by some importers. Traders pay import duties on base values irrespective of the prices they paid for the oil.

"This is likely to make imports of palm oils and soyoil cheaper by Rs 1,000 per tonne and 50 per cent of this affect is likely to be passed on to the market," said Sandip Bajoria, president of the Central Organisation of Oil Industry and Trade.

The benefit is unlikely to be passed on to retail edible oil consumers for this cut basically helps to reduce the disparity between imported and local prices of edible oils, Bajoria added.

Another trader, however, added that the cut is likely to make imports of edible oil cheaper, thereby leading to a rise in imports. This is likely to keep prices weak in the near-term.

The government sets the tariff value on palm and crude soybean oils. Tariff value changes are administered in tandem with a minimum 10% change in international prices.

On the impact of tariff cut, traders and analysts say it is unlikely to have much impact on the current prices as the market already has discounted it.

"The market was rife with talk of tariff cut since last two days and it did come today when the prices have fallen over the last two days," said a Mumbai-based trader.

The prices are likely to remain flat for the next 3-4 days. Price of crude palm oil (ex-Kandla) is Rs 327-28 per 10 kg today, down Rs 5 from yesterday's close.

Earlier during the day, Bursa Malaysia Derivates's palm oil futures also rose. The benchmark CPO December contract rose 8 ringgits today to 1,399 Malaysian ringgit per tonne (about $371 per tonne) on expectation of good demand following expectations that India may cut import duties on edible oils.

At Indore-based National Board of Trade, soyoil October contract ended at Rs 364.80 per 10 kg, down Rs 2.30.

Already, following a liquidity crunch in the edible oil market, softer overseas prices and lack of domestic demand, processors and traders are avoiding lifting stocks from ports. The port stocks are estimated to be around 4 lakh tonne, sources said.

According to market sources, India has already imported 1.29 lakh tonne of crude soyoil and 42,000 tonne of CPO till today. The industry estimates of edible oil imports for the oil year 2004-05 (that is November-October period) are likely to be revised to an all-time high of 52 lakh tonne. Last year, India's imports were 44 lakh tonne.