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Edible oil body advises against import of Malaysian palm oil

Harish Damodaran
Prime Minister Narendra Modi shakes hands with his Malaysian counterpart Mahathir Mohamad (File/PTI)

The country’s apex edible oil trade association has urged its members to “refrain” from importing palm oil from Malaysia in the light of its Prime Minister, Mahathir Mohamad, raising the Kashmir issue at the United Nations General Assembly.

“Our Government has not taken kindly to the unprovoked pronouncements by the Malaysian Prime Minister and is contemplating some retaliatory action … In your own interest as well as a mark of solidarity with our Nation, we should avoid purchases from Malaysia for the time being,” Atul Chaturvedi, president of the Solvent Extractors’ Association of India, said.

As per Commerce Ministry data, India’s vegetable oil imports were valued at Rs 69,023.79 crore in 2018-19 and Rs 27,972.27 crore during April-August 2019. A significant chunk of this comprised palm oil: Rs 36,632.99 crore (2018-19) and Rs 15,452.70 crore (April-August 2019). The share of Malaysia within that was Rs 10,049.04 crore (2018-19) and Rs 8,392.16 crore (April-August). While imports from Indonesia were higher in 2018-19 (Rs 23,643.28 crore), they have, however, been lower in April-August this year (Rs 5,289.46 crore).

The surge in imports from Malaysia is being attributed largely to the duty advantage on RBD (refined, bleached and de-odourised) palmolein granted to it by India under a bilateral Comprehensive Economic Cooperation Agreement. While the said agreement was signed in October 2010, the lower duty of 45 per cent on RBD palmolein imports from Malaysia – as opposed to 50 per cent from Indonesia – took effect from January 1.

As a result, refined palm oil consignments from Malaysia have shot up from 7.17 lakh tonnes (lt) in the whole of 2018-19 to 14.03 lt in the first five months of this fiscal. On the other hand, imports of both crude palm oil (CPO) and RBD palmolein from Indonesia have plunged from 41.57 lt and 16.78 lt in 2018-19 to 14.33 lt and 0.45 lt in April-August 2019, respectively

India’s edible oil industry mostly imports crude palm, soyabean and sunflower oil and sells these in the domestic market after refining (i.e. removing gums, waxes, free fatty acids, colour, and volatile compounds).

RBD palmolein imports from Malaysia soared after the duty on it was slashed from 50 per cent to 45 per cent from January 1, even as CPO tariffs were retained at 40 per cent.

But, following pressure from the domestic industry, the government imposed a 5 per cent safeguard duty on Malaysian RBD palmolein with effect from September 4.

In the process, the earlier duty differential between RBD palmolein (50 per cent) and CPO (40 per cent) was restored.

“Our refineries would obviously want only crude oil imports to come in. The appeal to refrain from buying Malaysian oil makes business sense because that would mean less RBD palmolein imports. Malaysia’s preference is to export RBD palmolein, unlike Indonesia, which has no issue with selling only CPO. In the event of the government taking retaliatory action against Malaysia, there will be more imports of Indonesian CPO as well as other crude edible oils (soyabean from Argentina and Brazil and sunflower from Ukraine),” said an industry observer. Crude soyabean, sunflower and rapeseed oil are subject to 35 per cent duty, while refined oils attract 45 per cent.

In his address at the UNGA on October 1, Mahathir Mohamad had called Jammu & Kashmir a “country”, while accusing India of “invading and occupying” it.