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.