The share of refined oil in overall vegetable oil import seems likely to hit a new high of 40 per cent this oil year (November 2012–October 2013), dismaying domestic refiners.
The major reason is an inverse duty structure in major exporting countries such as Malaysia and Indonesia, coupled with narrowing import duty differential between crude and refined oil.
Import of refined oil (termed refined, bleached and de-odorised or RBD oil) jumped to 22 per cent of the total between November 2012 and July 2013 at 1.8 million tonnes, as compared to 19 per cent or 1.3 mt in the same period of the previous year. Import of crude palm oil was 6.06 mt in the same period as against 5.8 mt in the same period of the previous year.
This rising import of refined oil is a threat for domestic refineries, which have built a capacity of 20 mt. Capacity utilisation is currently only 30 per cent from the peak season’s 75 per cent.
“The share of imports of refined oil might go up to 50 per cent of the total next year if the trend continues,” said B V Mehta, executive director of the Solvent Extractors’ Association (SEA), the apex trade body in the edible oil industry.
Malaysia and Indonesia have kept an inverse duty structure, of an export levy of nine per cent on crude oil and only three per cent on refined oil. With this differential, Indian import of refined oil works out cheaper than buying crude oil.
“Processing of imported crude oil works out to a Rs 3,000-4,000 per tonne loss for Indian refineries. We have urged the government to raise import duty on both crude and refined oil by 10 per cent and to keep the duty differential between them at 7.5 per cent, as advised by the committee headed by Ashok Lahiri in 2004. Raising the import duty will force the Indonesian authority to reduce their prices proportionately due to high inventory and nullify its impact on the retail price in India,” said Dinesh Shahra, managing director, Ruchi Soya Industries.
Currently, the import duty on crude oil works out to 2.5 per cent and refined oil at 7.5 per cent.
Both Malaysia and Indonesia have around 3.5 mt of surplus inventory which they are looking to offload. Being the largest edible oil importer, with around 10.5 mt estimated for the current year, India will be a prime destination.
SEA says many small refining units have started declaring a closure, with loans borrowed from banks turning out as non-performing assets. There is already over-capacity and the sudden increase in import of refined oil would worsen the sentiment, said Pradeep Chowdhry, managing director of Gemini Edibles & Fats, a Hyderabad- based edible oil producer.
(Source – http://www.blackseagrain.net/novosti/india-vegetable-oil-refineries-seek-protection-from-rising-imports)