Indian CPO import duty cut to lower soyoil demand

25 March 2008 07:49  [Source: ICIS news]

SINGAPORE (ICIS news)--The Indian government’s decision last week to cut import duty on crude palm oil (CPO) to 20 % from 45% will increase demand and keep prices stable but could lower demand for soyoil, the import duty of which remains unchanged at 40%, an official from the Solvent Extractors Association of India said on Tuesday.

The duty on refined palm oil was trimmed to 27.5% from 52.5%, bringing it in line with import duty on all refined oils except soyoil.

Speaking in a telephone interview from Mumbai in India, B V Metha, executive director of the association said the market talk was that a similar cut would be made in the import duty of soyoil, but added that this has not been confirmed.

Soyoil demand would continue from certain segments, especially small refiners who could not refine palm oil, but high soyoil prices would squeeze demand, especially from the lower segment of society, he said.

Soyoil imports were expected to fall to 500,000-600,000 tonnes this year – from November 2007-October 2008-- down from 1.2 m tonnes last year, he said.

"The market is very volatile, it is very hard to predict price changes right now, but I don’t see prices going down for palm oil as demand will increase with the cut in import duty," he added.

"The price of soyoil is too high compared with palm oil because of the disparity in the landed costs -- the cost of the product plus the import duty, which is about $250/tonne. It is my expectation that soyoil imports will fall," he said.

"All vegetable oil imports, both edible and non-edible are expected to rise to 5.7-5.8m tonnes this year, compared with 5.6m tonnes last year. Palm oil imports will constitute more than 80% of total edible oil imports," he added.

Palm oil imports, not including non-edible palm oil, may reach 4.5m tonnes this year, up from an earlier estimated 3.5-4m tonnes, G Patel from Dipak Enterprises, a trading firm based in India’s western state of Gujarat said.

The cut in palm oil import duty has lowered prices by about Rs2000-3000/tonne ($50-$75/tonne) to Rs52,500/tonne, while soyoil has risen by Rs1,500/tonne, he added.

India consumes around 12.3m tonnes/year of edible oils, helped by imports of nearly 5m tonnes/year, he added.  

The country imports palm oil mainly from Malaysia, Indonesia, and soyoil from Brazil and Argentina.

($1=Rs40.03)

By: Arujnee J Ram
+65 6780 4359

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