14-Jul-2013
India, the world’s biggest palm oil buyer, is set to import record amounts of the refined variety, taking advantage Palm of lower export taxes in Indonesia and Malaysia as the producers seek to encourage domestic refining.
The share of refined oil will climb to 60 percent to 70 percent of total palm purchases by Oct. 31, said Dorab Mistry, a director at Godrej International Ltd. That may increase to 80 percent by December if India fails to raise the import duty, he said. Such products were 20 percent of shipments a year earlier, according to the Solvent Extractors’ Association of India.
Malaysia and Indonesia, suppliers of about 87 percent of the world’s palm oil, cut taxes on shipments to clear stockpiles and boost prices. Futures for the oil used in everything from noodles to biofuel entered a bear market in June 2012 as output expanded and demand slowed. Stockpiles are poised to jump 21 percent to a record 9.5 million metric tons in 2013-2014, U.S. Department of Agriculture data show.
“The problem is created by the differential export taxes levied in Indonesia and Malaysia, and the Indian government has refused to rectify this situation,” Mistry said in an e-mailed response to questions from Bloomberg. “The economics of refining are so bad.”
Indonesia set the export tax on refined, bleached and deodorized palm olein at 4 percent for July, compared with a 10.5 percent tariff on crude oil. RBD palm olein exports from Malaysia attract no taxes, while crude oil shipments are taxed at 4.5 percent since March. India imposed a duty of 2.5 percent on crude edible oil imports in January, while keeping the levy on refined varieties unchanged at 7.5 percent.
Low Capacity
The gap between RBD olein and crude on a cost, insurance and freight basis delivered to Indian ports is at times as low as $10 and on odd days prices are the same, said Mistry.
The industry is in a serious crisis and most plants are operating at very low capacity, said B.V. Mehta, executive director of the extractors’ association. The government should increase taxes to maintain a gap of at least 10 percent between RBD palm olein and crude oil, he said.
“Our refining capacities are low because of the higher refined imports,” said Dinesh Shahra, managing director of Ruchi Soya Industries Ltd. (RSI), the biggest importer of cooking oils. “This is true for other refiners as well,” he said by text message. Imports are definitely cheaper and that’s why so much olein is coming in, said Atul Chaturvedi, chief executive officer of Adani Wilmar Ltd.
Source:-www.bloomberg.com
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