March 10, 2004

India Increase Soyoil Import Duty

INDIA has raised the import duty on the base price of soyabean oil from US$643 (US$1 = RM3.80) a tonne to US$710 a tonne, but left unchanged the base price for palm oil.

The base price for crude palm oil (CPO) in the import duty cost calculation is US$504 a tonne, and US$552 a tonne for palm olein.

The new base price makes soyabean more expensive to import in India but it still pays lower tax than palm oil.

India can impose a maximum import duty of 45 per cent on soyabean oil, but is allowed to charge up to 300 per cent import duty on other edible oils, as part of the conditions to enter the World Trade Organisation (WTO) in 1995.

Godrej International Ltd director Dorab E. Mistry said the new base prices for the edible oils are effective from Wednesday.

Foreign soyabean oil entering India is slapped with a 45 per cent import duty, while palm oil products import duty ranges between 60 and 80 per cent.

"There will be a positive impact on palm oil. But it will be a marginal one due to the current duty structure," he told Business Times on the sidelines of a palm and lauric oils conference and exhibition in Kuala Lumpur yesterday.

The annual two-day conference, which started on Wednesday, is organised by the Malaysian Derivatives Exchange.

Dorab acknowledged that the existing edible oil import duty structure is discriminating to palm oil and there is very little that the Indian Government can do to alter the situation.

"The Indian Government's hands are tied following the pledges made when the country becomes a member of the WTO," he said.

Dorab said Washington has succeeded in getting India to agree to limit the maximum import duty for soyabean oil at 45 per cent.

On the current firm prices of palm oil, Dorab said there is still an upside potential for the commodity following poor soyabean production in South America.

"I expect CPO futures price to peak to RM2,200 a tonne by April this year before entering a correction period in May or June. It will rise again in July," he added.

India is expected to consume some 2.05 million tonnes of soyabean oil and 4.5 million tonnes of palm oil this year.