To curb imports and boost local refining, India has raised the tax on refined palm oil from Malaysia to 50% from 45% for six months.
India being the world’s biggest edible oil importer currently enforcing 40% import tax on crude palm oil and 50% on refined palm oils. But since January, under an agreement with Malaysia, shipments of refined palm oils from Malaysia have been taxed at 45%.
This lessens the effective difference in duty between crude palm oil and refined palm oil from Malaysia for Indian refiners to 5.5% from 11%, making overseas buying of refine palm more profitable.
According to data compiled by the Malaysian Palm Oil Board, there’s a 727% surge in Malaysia’s refined palm exports to India in the first half of 2019 to 1.57 million tonnes compated with the same period a year before.
Rising shipments of refined palm oil hit local refiners and filed an application with the Directorate General of Trade Remedies for an investigation, Mumbai-based trade body the Solvent Extractors’ Association of India said.
This led to recommendation of raising the import tax on refined products.
However, the 50% duty on refined products would be applicable until March 2, 2020.
According to Sandeep Bajoria, chief executive of the Sunvin Group, a Mumbai-based vegetable oil importer, the hike will prompt Indian buyers to switch to crude palm oil.
“Importing refined palm oil is no longer attractive. From October imports of CPO could rise and refined palm will go down,” he said.
In the first half of 2019, Malaysia surpassed Indonesia, who’s the biggest supplier – claiming two-thirds of India’s palm oil imports, to India due to the duty advantage.
“Indonesia is likely to regain market share again in coming months. It provides crude palm oil more competitively than Malaysia,” said a Mumbai-based dealer with a global trading firm. Palm oil accounts grabbed two-thirds of India’s vegetable oil imports. New Delhi also imports soyoil from Argentina and Brazil and sunflower oil from Ukraine and Russia.