The Hindu Business Line : Soya oil tariff cut leads to revenue loss

THE recent change in degummed soyabean oil tariff value has created an awkward situation for the Finance Ministry as the move is widely seen to be out of tune with market realities. Worse, it is suspected to have been made with the intention of helping select importers with huge cargo in customs bond.

On March 1, the tariff value on imported soyabean oil was fixed at $485 a tonne, a reduction of $80 a tonne from the previous level. The change was unwarranted because, far from falling, international soyabean oil prices have been rising and had risen by $50 a tonne since late last month.

It is believed, there has been a heavy loss of revenue. About one lakh tonnes of soyabean oil lying in customs bond have reportedly been cleared following the tariff value reduction. This would translate to revenue loss of about Rs 160 crore. Windfall gains were made by a few importers.

It is unclear whether the Finance Minister himself authorised the decision or whether it was taken without consulting him. If it is the latter, it calls for investigation as to the circumstances and compulsions under which the decision was taken. Even during best of times Indian importers and overseas suppliers are not happy with the timing of tariff value changes.

Trade associations have been demanding announcement of tariff value on a fixed date, say the first day of every month, with liberty to change it anytime when market conditions warrant.

Lack of transparency has become the bane of tariff value system for vegetable oil. Uncertainty invariably leads to rampant speculation. Last two days, the market has been agog with rumours of an imminent change (upward revision) in tariff value. The Government must take into account not only current prices but also the emerging global market situation.

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