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OILS AND FATS

Import duty on RBD palm oil from Malaysia increased by 5% for 180 days
Monday, 09 September, 2019, 08 : 00 AM [IST]
The import duty on RBD palmolein/palm oil originating in Malaysia and imported under the India-Malaysia Comprehensive Economic Cooperation Agreement was increased by five per cent to 50 per cent for a period of 180 days.

A higher import of refined palm oil from Malaysia in the last eight months was the prime reason for the hike in import duty imposed by the government on Malaysian refined palm oil.

Earlier this year, the import duty on refined palm oil from Malaysia was kept lower at 45 per cent compared to that of 50 per cent from Indonesia.

Table 1: ImporTTable 1: Import duty rate


14th June 2018

1st Jan 2019

4th Sept 2019

Malaysia




Crude palm oil

44%

40%

40%

RBD palmolein

54%

45%

50%

Indonesia




Crude palm oil

44%

40%

40%

RBD palmolein

54%

50%

50%

(Source: SEA and CBIC)

(Note: The import duty rate mentioned above does not include social welfare cess duty rates in bold are revised import duty rates.)

Edible oil imports scenario
During the first nine months (i.e., between November 2018 and July 2019) of current oil year, total edible oil imports increased by 3.3 per cent to 10.8 million tonne due to a sharp rise of about 40 per cent in refined edible oil imports. This was primarily on account of the lower import duty rate of refined palm oil imported from Malaysia that prompted higher imports. Crude edible oil imports declined by 2.7 per cent to 8.7 million tonne between November 2018 and July 2019.

Table 2: Edible oil (crude and refined) imports (in million tonne)



Total imports

Crude edible oil

imports

Share in total

imports

Refined edible oil

imports

Share in total

imports

Nov17-Jul18

10.5

9.0

85.7%

1.5

14.3%

Nov18-Jul19

10.8

8.7

80.7%

2.1

19.3%

% change

3.3

-2.7


39.8


(Source: SEA)

Also, the low duty differential of five per cent for Malaysia between crude and refined palm oil compared to the duty differential of 10 per cent for Indonesia resulted in higher refined palm oil imports from Malaysia, and thus, the share of refined edible oil imports in total edible oil imports increased to 19.3 per cent between November 2018 and July 2019 from 14.3 per cent in the corresponding period a year ago.

Besides this, the share of Malaysia in total edible oil imports expanded to 26.5 per cent between November 2018 and July 2019 from 15.8 per cent between November 2017 and July 2018 backed by the low duty differential advantage. In contrast, the share of Indonesia in total edible oil imports contracted to 32.5 per cent from 37.6 per cent earlier.

ConcludConcluding remarks
With the hike in import duty, the custom duty rates for Malaysia and Indonesia stand at par, and the duty differential between crude and refined palm oil for both the countries now stand at 10 per cent, thus negating the advantage of low duty differential to Malaysia

The hike in import duty rate on imports from Malaysia is expected to bring down imports of refined palm oil from the country which, in turn, would reduce the pace at which total edible oil imports are expected to grow during oil year 2018-19

A decrease in refined palm oil imports from Malaysia is expected to disturb the supply of refined palm oil in India, which can cause the refined palm oil prices to inch upwards. In additon to this, higher import duty would also lead to a rise in the prices of landed refined palm oil.

The move is expected to aid the domestic refiners as it will help increase the capacity utilisation of the refining mills.
 
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