Industry seeks duty revamp for edible oil

The vanaspati industry has expressed disappointment over the Union budget for not correcting the distorted edible oil customs duty structure that favours the import of finished product over raw material.

It has also described the abolition of 4 per cent additional countervailing duty on crude and refined edible oils as 'too insignificant' to impact edible oil prices.

This has been conveyed to Prime Minister Manmohan Singh and other ministers concerned by the Indian Vanaspati Producers¿ Association (IVPA).

It has pointed out that while the crude palm oil, the chief raw material for manufacturing vanaspati, attracts a hefty import duty of 61.8 per cent (including 3 per cent cess), the finished product (vanaspati) is imported duty-free from Nepal, Sri Lanka and other SAARC countries under the free trade agreements with them.

Vanaspati producers in Nepal are allowed to import crude palm oil at zero duty while those in Sri Lanka pay a duty of only $25 a tonne. This gives them a cost advantage of over Rs 9,000 a tonne.

As a result, the duty-free vanaspati imported from these countries sells in the Indian markets at around Rs 50 to Rs 60 per 15 kg, lower than the domestic product.

Unable to face the competition, the Indian vanaspati units are shutting down their plants. Of the country's total 264 vanaspati units, 148 are currently lying closed, the IVPA points out. The total capacity utilisation in the industry has dropped to merely 20 per cent, and the overall vanaspati output is down sharply to only around 1.1 million tonne a year.

The IVPA's memorandum points out the industry was hoping that the import duty on raw crude palm oil would be cut down to around 20 to 25 per cent, at least for the actual users. But the Budget has belied this hope.

It has suggested vanaspati should be put on the negative list in the existing free trade agreements with Nepal, Sri Lanka and other SAARC countries.

If that is not possible for some reasons, the domestic industry should be allowed to import crude palm oil at a concessional duty of 20 to 25 per cent on actual user basis, to provide it a level-playing field with the duty-free imports.