Govt cuts import duty on crude, refined palm oil

Ignoring the threat to domestic edible oil industry and farmers, the government on Wednesday slashed import duty on refined palmolein from 50% to 45%, while that on crude palm oil (CPO) from 40% to 37.5% with immediate effect.

A notification in this regard has been issued by the finance ministry.

Domestic refined edible oil makers will get negatively impacted by this decision while importing companies stand to gain.

FMCG companies such as HUL, Dabur, others are the major beneficiary while edible oil makers Ruchi Soya, ITC, Marico Industry will have a negative impact on their earnings.

The government decided to import duty as required under the ASEAN agreement and the India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA), the notification added.

Solvent Extractors’ Association of India (SEA) has strongly opposed this move while raising concerns over its implications.

The trade body feels that
after the reduction in import duty, the tax difference between CPO and refined palmolein has further shrink from 10% to 7.5%.

This will have serious impact on domestic palm oil refining industry and oil seeds farmers.

It fears import of refined palmolien would increase and capacity utilisation of the domestic industry would be affected leading to potential loss of employment.

After a long time, the domestic oilseeds had started selling their produce above the minimum support price (MSP).

Lower import duty would make it difficult to defend MSP and the new found enthusiasm of the oil seed farmers would be dampened.

India’s edible oil imports are now touching 70% of the consumption.

The duty cut would be counterproductive and contrary to the government’s stated objective of increasing domestic oil seed production

Asserting that India too should protect the interest of farmers like Malayasia and Indonesia, the SEA observed that Indonesia from January 1 has imposed export duty of $50 on CPO and $30% on refined palmolien.

Similarly, Malaysia has imposed export duty of $31% on CPO and zero duty on refined palmolein which work out to be nearly 5% on CPO value, thus effective duty difference is hardly 2.5% only.

Net net we expect that this notification will benefit all branded players of edible oils and soaps and largely benefit the domestic FMCG segment hopefully from the Q4 of FY20 onwards by reduced inputs costs which will help them increase there profit margins moderately.

Disclaimer –
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.