July 10, 2013
NEW DELHI—India, the world's largest edible-oil importer, is considering raising the import tax on refined products to prevent increasing supplies from Indonesia and Malaysia which hurt local refiners already struggling to generate profits, according to government officials.
Bulk consumers prefer to import refined edible oil from Indonesia and Malaysia because that is cheaper than domestically refined oil, as the difference between crude and refined edible oil has narrowed. Domestic refiners have been complaining that the government's decision to impose a 2.5% import tax on crude edible oil in January has made it almost as expensive to buy as refined products. India taxes all refined edible-oil imports at 7.5%.
Indian edible-oil refiners say their profit margins have been under pressure for more than a year since Indonesia raised the export tax on crude palm oil in order to encourage more production of refined oil, which would generate higher profit margins and job opportunities.
The Indian government will likely raise the import tax on refined products by 2.5 percentage points within a month, a senior food ministry official said.
But Sandeep Bajoria, chief executive of Sunwin Group, said a 2.5 percentage-point increase would only help domestic refiners just about break even. He said the import-duty difference between crude and refined oil needed to be at least 10% for domestic refiners to generate profits.
Imports of refined palm oil from Indonesia and Malaysia by bulk consumers rose about 16% to 1.25 million metric tons during the first seven months of this marketing year, according to the Solvent Extractors' Association of India.
Refined palm oil imports hit a monthly record of 373,837 tons in May.
In May, refined palm oil as a proportion of overall palm-oil imports surged to an all-time high of 42% from an average range of 12%-16%, according to a report by India Ratings & Research.
"Domestic refiners are now operating at 30%-35% capacity-utilization levels as against around 50% earlier," India Ratings said.
Indonesia's export tax on crude palm oil was fixed at 10.5% in July. The export tax for refined palm olein is at 4%, up slightly from 3% in June. Malaysia levies a 4.5% tax on crude palm oil, but it doesn't tax exports of palm olein.
Palm-olein prices in the local market are currently around 54,500 rupees ($908) per ton.
India's edible-oil imports have been rising over the past decade, hitting a record 10 million tons in the last marketing year ended Oct. 31.
Source:-online.wsj.com
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