Financial Daily from THE HINDU group of publications
Wednesday, Feb 16, 2005
Agri-Biz & Commodities - Oilseeds & Edible Oil
Industry & Economy - Excise and Customs
Govt hikes import duty on palm oils; base prices cut
New Delhi , Feb. 15
IN a major pre-Budget tariff restructuring exercise, the Government today hiked the basic Customs duty on the entire palm oil complex, alongside a reduction in tariff values or base prices for computation of duty liability by importers.
The Customs duty on crude palm oils (CPO) and its fractions (which covers crude palmolein) has been increased from 65 per cent to 80 per cent, while the duty on other palm oils (including refined bleached, de-odourised or RBD palm oil and RBD palmolein) has been revised upwards from 75 per cent to 90 per cent.
But simultaneously, there has been a lowering of the tariff values or base prices on which the Customs duty is levied on the imported palm oil consignments.
The tariff value has been reduced from $454 to $400 per tonne on CPO, from $489 to $415 per tonne on RBD palm oil, from $471 to $410 per tonne on `others-palm oils', from $479 to $412 per tonne on crude palmolein, from $497 to $425 per tonne on RBD palmolein, and from $488 to $420 per tonne on `others-palmolein'.
The decision to hike overall duty levels, along with a reduction in tariff values, would be beneficial to the Government in overall revenue terms.
For instance, the earlier 65 per cent duty on a tariff value of $454 per tonne on CPO would have realised $295.1 per tonne in Customs revenue, whereas the new 80 per cent levy on the revised tariff value of $400 per tonne would yield $320 per tonne.
Similarly, in the case of RBD palmolein, the earlier import duty of 75 per cent on a tariff value of $497 per tonne would have translated into revenues of $372.75 per tonne, while in the new duty regime (90 per cent on $425 per tonne), the Government would be able to mop up $382.50 per tonne.
The net impact, then, would be to make imported palm oil more costly for the consumer, though it would provide some additional protection to the country's oilseed growers, particularly at a time when the rapeseed-mustard crop is being harvested.
The other big ramification of today's decisions is increasing the viability of soyabean oil imports from Brazil, the US and Argentina, compared to palm oil from Malaysia or Indonesia.
The reason for this is that the Government has left unchanged the import duty as well as tariff value on crude soya oil at 45 per cent and $565 per tonne respectively.
Thus, even as the effective duty liability on CPO would go up by $25 per tonne, there would be no such additional costs to be borne on imported soya oil.
Further, there is no tariff value applicable on refined soya oil, which would make imports an even more viable proposition.
In fact, the landed cost of refined soya oil in Indian ports is currently around $540 per tonne, which is lower than the $565 per tonne tariff value on crude soya oil.
Meanwhile, the Vanaspati Manufacturers Association of India (VMA) has expressed concern over the decision to increase the import duty on CPO, which, it believes, will lead to a flood of vanaspati imports.
"The import duty on vanaspati is 30 per cent, which is way above the 80 per cent chargeable now on CPO (the raw material). Moreover, vanaspati is importable from Sri Lanka at nil duty under the bilateral trade treaty signed with it," said Mr S. Gurumoorthi, Executive Secretary, VMA.
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