“The ‘opening up’ by freely allowing import of RBD palmolein and RBD palm oil will have serious repercussions for both domestic refiners and farmers as this will have a dampening effect on the prices of domestic oilseeds.”
The Government would do well to withdraw its decision to freely allow the import of RBD palmolein and RBD palm oil, said the Solvent Extractors’ Association of India (SEA). Such a decision would kill the domestic refining industry and will have severe repercussions on farmers.
In a letter to Union Minister for Consumer Affairs, Food and Public Distribution, and Commerce and Industry Piyush Goyal, SEA President Atul Chaturvedi said: “The ‘opening up’ by freely allowing import of RBD palmolein and RBD palm oil will have serious repercussions for both domestic refiners and farmers as this will have a dampening effect on the prices of domestic oilseeds. Also, refined oil import will surely send the industry to the door of bankruptcy as we have seen in the past with so many refineries.”
Stating that India’s veg oil refining industry is operating at hardly 50 per cent capacity, Chaturvedi said the margins are minimal because of the stiff competition. “By this action, it seems that the Government is penalizing the refining industry for no fault of theirs,” he said.
The Directorate-General of Foreign Trade (DGFT) had placed the import of RBD palmolein and RBD palm oil under the ‘Restricted List’ from January 8, 2020. SEA said this decision greatly helped domestic edible oil refiners to increase their capacity utilization by processing larger quantities of crude palm oil (CPO).
Import of RBD palmolein dropped from 27.3 lakh tonnes during the oil year November-October 2018-19 to 4.21 lakh tonnes in the corresponding period of 2019-20, and hardly 21,000 tonnes arrived in India during November-May of the oil year 2020-21.
The decision to place refined palm oils in the restricted list in the past one-and-a-half years had incentivized more investors in the industry. However, he said the recent action of the Government to freely allow imports will send wrong signals to the investors.
Indonesia’s levy and export duty on CPO is $291 a tonne from July 2, while that on RBD Palmolein (the finished product) is only $187 a tonne. This provided added advantage to Indonesian refiners, who sell RBD palmolein and RBD palm oil at a much lower price, even below CPO. This will seriously hurt domestic refiners. The export duty on CPO is $90 a tonne in Malaysia against nil on refined palm oil.
He said the DGFT notification would also open the flood gates for import of refined oils from Nepal and Bangladesh under the SAFTA agreement at nil duty, creating havoc in the market as domestic producers will not be able to compete with these oils imported at nil duty and refiners in northern and eastern India will suffer heavily.
Allowing free import of refined palm oils will not bring down prices but will kill the domestic industry. Chaturvedi said adding inflation in edible oils was on account of higher international prices plus higher import duty in India by the continuous increase in tariff values.