The Hindu Business Line : Tariff rate cut: Relief to vegoil importers

In its desperate attempt to fight inflation, the Centre has extended twin-benefit to the import trade which must see some smile return to the faces of importers who have been for some time complaining only about omissions and commissions of the Government.

The first good news is of course the much-awaited, and indeed overdue, reduction in base price for edible oils. The correction should have taken place several weeks ago; but revenue considerations and lack of overt consumer protest against high prices encouraged the Government to postpone the decision as far as was possible.

The Mumbai wholesale market has reacted favourably with prices moving down in line with tariff reduction. Ready groundnut oil was down to Rs 520 per 10 kg trading lot, having lost Rs 5 (Rs 500 per tonne). Refined palmolein turned softer to Rs 412 per 10 kg from Rs 425, a reduction of Rs 1,300 a tonne.

Ironically, but not unexpectedly, offers from Malaysia moved up. Palm oil is showing a contrarian behaviour. The soya complex has turned somewhat weak following favourable weather forecast; but its effect on the palm complex has possibly been nullified by the latest Indian move.

Refined palmolein for October was on offer at $450 a tonne free-on-board, up from $447.50 on Wednesday, suggesting large-scale Indian purchases for the next couple of months, in addition to demand from other Asian countries.

The revision in base price has come a little too late as kharif oilseed arrivals have already begun in parts of the country. Interestingly, many importers are going to make windfall gains with the reduction in price on which duty is calculated.

It is estimated that as much as one lakh tonnes of various vegetable oils are bonded in Customs warehouses across the country, either in anticipation of tariff value reduction or awaiting quality clearance from the Port Health Organisation, popularly called PHO certificate.

These goods are now expected to be cleared soon as importers' duty liability will be lower. To what extent consumers will benefit remains to be seen.

The Government has also lifted the unofficial embargo in vogue for the last several days on use of DEPB facility for clearing imported edible oils (see Business Line, September 5).

In what is widely seen as a compromise formula, it has been decided by the Government that importers will be allowed to use DEPB to the extent of 50 per cent of the duty payable and the balance 50 per cent will have to be paid by cash to the Customs department.

Edible oil importers holding sizeable DEPB - all purchased from the market at a hefty premium - have heaved a sigh of relief; so have exporters who have found the premium shrinking over the last few days.

"This welcome move should bring some relief to many beleaguered edible oil importers," said Mr Jayant Lapsia, President of All India Liquid Bulk Import Export Association.

Import statistics compiled by Solvent Extractors' Association of India showed record arrival of six lakh tonnes (lt) of edible oil in August, with crude palm oil (2.33 lt ) and crude soyabean oil (2.03 lt) accounting for the bulk.

India vegetable oil imports from November 2003 to August 2004 aggregated 33 lt as compared with 42 lt during the same period previous year.

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