Sharp increase in tariff on palm oil, chickpea

FILE PHOTO: A worker collects palm oil fruit inside a palm oil factory in Sepang, outside Kuala Lumpur, Malaysia | Photo: Reuters
The central government has sharply raised the import duty on palm oil and chana (chickpea or Bengal gram).

The duty on crude palm oil (CPO) has been raised to 44 per cent from the earlier 30 per cent and on RBD (the refined variety) to 54 per cent from 40 per cent. For kabuli chana (white chickpea) the import duty of 40 per cent is now 54 per cent.

For desi chana (black chickpea), the duty of 40 per cent has been raised to 60 per cent.

 Following the duty hike, CPO May futures price fell about 3 per cent to 2,469 ringgit  on Bursa Malaysia.

Import duty can be raised up to the “bound rates” applicable under World Trade Organization (WTO) rules to protect farmers. For edible oils, these go up to 300 per cent. For chana and soybean oil, 60 per cent and 45 per cent, respectively.

In the Union Budget he presented on February 1, Finance Minister Arun Jaitley announced an import duty increase from 12.5 to 30 per cent on crude edible vegetable oils and for the refined form from 20 per cent to 35 per cent.

There is no change in duty for soft oils like rapeseed-mustard, soya oil and sunflower oil.

After a 10 per cent social welfare cess, the net import duty will be 59.4 per cent and 66 per cent, respectively, for kabuli and desi chana.

Edible oil duties have been increased many times in the past six months, to support Indian crushing mills.

Oilseed prices have fallen significantly in recent months, due to a better crop. India primarily imports palm oil from Indonesia and Malaysia and soy oil from Argentina and Brazil. It also buys small volumes of sunflower oil from Ukraine and canola oil from Canada.

Atul Chaturvedi, president of the Solvent Extractors’ Association, said of the latest increases: “Timely because India’s dependence on these was reaching alarming levels, of almost 70 per cent of consumption.”

The effective rate on CPO will be 48.4 per cent after calculating social welfare cess; on the refined oil, 55.9 per cent. Both duties have effectively gone up 15.4 per cent.

Chaturvedi said he was surprised that only palm oil was so protected. “This might defeat the purpose of helping farmers. With the mustard crop getting harvested, farmers will feel cheated if import duties on soya, sun and canola oils are not increased in the same proportion as palm oils.It would be difficult to encourage farmers to grow more oilseed and augment their income if duties on these oils are also not raised.”

On Monday when derivatives trade opens on the Multi Commodity Exchange, says Anuj Ggupta, research analyst at Angel Commodities, “a four to five per cent increase in prices is expected after this rate hike in edible oil. This is also supportive for all in the edible oil sector and prices are expected to remain firm, as the decision will help domestic supply for crushing and cap edible oil import in marketing year 2017-18”.

The increase in import duty on chana is considered a precaution; imports almost halted after an earlier rise in the levy.  “With restrictions on other pulses like moong (green gram), urad (black gram)and tur (red gram) imposed earlier, pulses import in FY18 is estimated 5.6-6 million tonnes, compared to six mt a year before. Next year, import will fall sharply due to all the restrictions and might be confined to 2-2.5 mt,” said an importer.

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