Quota on SE Asian palm imports could hit local trade

Tariff rated quotas on palm oil imports from Malaysia, Thailand and Indonesia under the proposed Free Trade Agreements will spell doom for the Indian edible oil industry, industry players said. Cheap palm oil would flood Indian markets if imports were allowed at lower duty, they said.

"Already palm oil imports from Malaysia and Indonesia constitute more than half of India's annual edible oil imports, and now if duties are lowered, these supplies would rise, hurting local trade," said B V Mehta, executive director, Solvent Extractors Association of India.

He was reacting to reports that the government is planning a Free Trade Agreement with ASEAN nations in January. Mehta said his association has written to Agriculture Minister Sharad Pawar requesting him to stall any such agreement that could be detrimental to the interests of local oilseed farmers.

Reports said the government proposes to introduce tariff-rated quotas or TRQs on import of palm oil from Malaysia and Indonesia; tea, coffee and pepper from Vietnam; and some manufactured goods from Thailand.

Under TRQs, duty lower than existing duty is levied on a fixed quantity of imports and purchases over the specified amount attracts normal duty.

Currently, in India palm oil is more costly to import than other edible oils, as it attracts a high customs duty of 80-90 per cent, while its nearest competitor, soyoil attracts an import duty of 45 per cent.

Industry figures show that in April imports of crude palm oil declined to 175,313 tonnes against 318,028 tonne in the same month last year, while import of crude soyoil rose to 159,094 tonne from 137,100 tonne.

A section of the edible oil industry said the move to have a tariff rate quota for palm oil imports from Malaysia and Indonesia is meant to correct this anomaly in favour of soyoil under pressure from those governments. "The government wants to destroy the local edible oil industry, just as they have done to the vanaspati industry by entering into FTAs with Sri Lanka and Nepal, which are now dumping huge loads of vanaspati at zero duty into India," Mehta of SEA said.

However, Prem Rustgi, general manager of Andhra Pradesh-based Foods, Fats and Fertilisers Ltd, said, if a certain quantity of palm oil is allowed to be imported at zero duty from Malaysia and Indonesia specifically for the local vanaspati industry, it would bring them at par with their competitors in Sri Lanka and Nepal.

"The main cost difference between vanaspati makers in Sri Lanka and Nepal and their Indian competitors is that they can import palm oil at zero duty, while our vanaspati traders pay a high duty of 80-90 per cent on palm oil. If this difference is reduced, then local industry could become more competitive," Rustgi said.