November 20, 2008
In a bid to help farmers, India is slapping an import tax on soy oil. The move will see oilseed prices climb for farmers.
The government imposed a 20 percent import tax on crude soy oil on Tuesday (November 18) ahead of coming general elections next year. The new legislation will fetch higher oilseed prices for soy farmers. India is the fifth biggest producer of soy in the world.
Sandeep Bajoria, chairman of the All India Seed Association, said re-imposing the duty on crude soy oil would help farmers. However the vegetable oil industry would not see this as an aid, as it has already been hit by the sharp fall in benchmark prices in Malaysia.
Calling the move "an eyewash", he pointed out that it has just been done to placate soy farmers in states like Maharashtra, Rajasthan and Madhya Pradesh.
On the other hand, as the soy import tax comes into place, importers in India will also turn to palm oil which is cheaper. Ashok Sethia, president of the Solvent Extractors' Association of India (SEA) said that whatever little soy oil imported will get reduced further as crude palm oil will be cheaper. Soy oil is hardly 10 percent of the total vegetable oil imports.
By the midday break, the benchmark February palm oil contract on the Bursa Malaysia Derivatives Exchange was at RM 1,467 per tonne, up RM 31, as India's decision to slap import duty on rival soy oil spurred trade.
Sethia said it defies logic to raise import duty just on soy oil which costs about $790 per tonne, while not tinkering with crude palm oil, which is at $440 per tonne.
Imports in the oil year to October rose 12.5 percent to 6.3 million tonnes from 5.6 million tonnes in the previous year, led by a surge in palm oil imports.
In an interview to Reuters in August, Sethia said the government was expected to re-impose import tax on crude oils.
Serthia said that they are again going to write to the government to tax crude palm oil which is a product of mass consumption. The decision on soy oil is going to benefit only Malaysia which will be able to sell more palm as soy oil imports will dwindle.
US$1=INR 50.49 as of November 20, 2008