Country’s biggest tax increase in a decade may cut palm oil imports
India’s palm oil imports are likely to drop until the end of the year after the world’s largest edible oils buyer raised import taxes to the highest in more than a decade, importers and dealers said.
India announced late on Friday that it raised its import tax on crude palm oil to 30 per cent from 15 per cent, while the duty for refined palm oil has been raised to 40 per cent from 25 per cent.
Malaysian palm oil futures dropped more than 3 per cent to a three-month low of 2,626 ringgit a tonne on Monday.
“Short term demand will see a major impact because it was such a steep price hike, but (India’s) local oilseed production is not enough to cover all its demand,” said David Ng, derivatives specialist at Phillip Futures in Kuala Lumpur.
The duty hike should lift India’s local oilseed prices, which may encourage farmers to sell oilseeds and increase supply for crushing, said Dinesh Shahra, managing director of Ruchi Soya.
Indian oilseed crushers had been struggling to compete with cheaper imports from Indonesia, Malaysia, Brazil and Argentina, reducing demand for local rapeseed and soybeans which have been trading below government-set prices in the physical market and angering farmers.
Indian soyoil and crude palm oil futures jumped by the daily maximum limit of 4 per cent on Monday.
“Importers will first clear earlier inventories. Then they will see at what level prices stabilise in the local market before deciding about December imports. December imports could be around 600,000 tonnes,” said a Mumbai-based dealer with a global trading firm.
While market participants were anticipating a duty hike, the extent of the increase surprised them.
“Many importers have sold palm oil in advance at the earlier duty rate. They will struggle in fulfilling commitments. Their entire margin has been wiped out,” the dealer said.
India’s palm oil imports in October stood at around 750,000 tonnes.
Edible oil imports for the full year, however, is expected to remain higher than last year.
“The overall import volumes are unlikely to change significantly for the entire marketing year as local oilseeds supplies are limited and there is huge demand,” said B.V. Mehta, executive director of the Solvent Extractors’ Association, a Mumbai-based trade body.
The South Asian country could import 15.5 million tonnes edible oils in the current year, down from an earlier estimate of 15.9 million tonnes, said Sandeep Bajoria, chief executive of the Sunvin group, a vegetable oil importer.
($ 1 = 4.1500 ringgit)