The Hindu Business Line : Customs duty on palm group of oils cut

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Customs duty on palm group of oils cut

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Landed cost likely to be lower by over Rs 2,000/tonne

Impact
Crude palm oil duty down 10 per cent to 70 per cent.
The Government would lose about Rs 650 crore during the remaining part of the current fiscal.

New Delhi , Aug. 11

The Centre on Friday cut import duty on palm group oils to cushion the impact of rise in international prices of edible oils on consumers and also check the domestic prices of such oils.

Briefing newspersons on the customs duty reductions, Mr Gautam Ray, Joint Secretary, Central Board of Excise and Customs (CBEC), said the Customs duty on crude palm oil, crude palmolein and other fractions of crude palm oil had been cut from 80 per cent to 70 per cent with immediate effect.

The import duty on crude palm oil was increased from 65 per cent to 80 per cent in February 2005.

On Friday, the Union Government also cut the import duty on refined bleached deodorised (RBD) palm oil, RBD palmolein and other refined palm oils from 90 per cent to 80 per cent.

Mr Ray said the reduction would reduce the landed cost of these oils, but added that they would still be higher than the landed cost prevailing in the first week of February 2006.

"The idea is we come back to more or less the prices of February 2006," he said, adding that the duty reductions were likely to be a revenue neutral exercise as far as the budget estimates for the current fiscal was concerned.

According to industry sources, prices of RBD palmolein could decline by Rs 3 a kg in view of the duty cut. For example, the landed cost of RBD palmolein is now likely to be Rs 43,150 a tonne against Rs 45,200 a tonne.

Although the Government would lose about Rs 650 crore during the remaining part of the current fiscal on account of the duty reduction in palm oils, the rise in base import prices is expected to bring in additional revenues of between Rs 650 crore and Rs 700 crore.

Palm oil imports constitute 40-45 per cent of edible oil imports in volume terms. The Finance Ministry official highlighted that international prices of palm oils have been rising during the current financial year, which has resulted in increase in domestic prices of edible oils.

It was pointed out that tariff value of crude palm oil, on the basis of which import duty is charged, has gone up from $417 a tonne in the first week of February to $447 in August. The Centre's move also comes after edible oil prices have begun to rise sharply since the beginning of this month. For example, RBD palmolein prices have increased by Rs 25 for 10 kg to Rs 479 since August 1. On Friday, crude palm oil hit a two-year high in Kuala Lumpur before closing at $452 a tonne. Heavy buying by China and Europe besides companies engaged in bio-diesel production is the reason for the spurt in global prices.