India Likely to Tax Crude Edible Oil Imports

NEW DELHI: India looks set to tax imports of crude edible oil and raise a levy

on refined varieties early next year, conceding industry’s demand for a

lid on surging imports to help refiners boost falling margins.

The steps will marginally cut purchases by the world’s largest

buyer of cooking oil and hurt small consumers who will have to pay

more, but the industry says the levy will encourage oilseed farmers to

make greater efforts to plug a yawning demand gap.

India, which imports more than half its annual needs of 16.5 million

tonnes, expects domestic edible oil supplies to rise by 1 million

tonnes in 2010/11, swelled by higher oilseeds output, thanks to a

better monsoon after last year’s drought.

One analyst said

edible oil imports were likely to fall 3 per cent in the year to

October 2011 after India bought a record 8.8 million tonnes in the

year to October 2010, helping drive up global palm oil prices 42 per

cent .

“With the likelihood of a rise in oilseed production, domestic

oil supplies are expected to rise by 1 million tonnes this year from

7.7 million last year,” said Veeresh Hiremath, chief analyst with

brokerage Karvy Comtrade, based in India’s southern city of Hyderabad.

India’s edible oil imports have been rising for the past 5 years,

prompting industry officials to reinforce their demand for an

increase in the duty.

“There is a strong possibility

of an import duty on crude and higher duty on refined edible oils

during the budget,” said Jyoti Kanda, director of trading firm Kanda

edible oils in Rajasthan, the main rapeseed-growing state.

Finance Minister Pranab Mukherjee was expected to announce the

measures when he presented the national budget in February, he said.

The government opened the floodgates to imports in April 2008

by dropping a crude vegetable oil import tax and cutting the duty on

refined oils to 7.5 per cent from 27.5 per cent. Helped by lower

duties, cooking oil purchases by India, which dislodged China as the

world’s No. 1 edible oil importer in 2009, rose 7.3 per cent to a

record in 2009/10.

Encouraging farmers is important to

attain a long-term goal of self-sufficiency in vegetable oils, said

Sudhir Kumar Panwar, chief of the Kishan Jagriti Manch, a farmers’

body.

So it is only a matter of time before the Indian

government starts raising import taxes for all palm oil products, a

Malaysian physical palm oil trader said in Kuala Lumpur.

“Right now the farming lobby, or rather the farming vote bank, would

be the most important for the government, as there is a good oilseed

crop coming in and global vegetable oil prices are still high,” the

Malaysian trader said. – Reuters

Source : Business Times

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