Reduction of Import duty: The Indian Government is under intense pressure to control food inflation as surged to 7.83% as on 3rd May 2008. No wonder, imports have been liberalized and custom duties on crude vegetable oils have been slashed to zero and on refined oil to 7.5%. The effective duty on RBD Olein is less than 3 per cent due to freezing of RBD olein tariff at US$ 484 against current CIF price US$ 1310.
Round Table Sustainable Palm Oil (RSPO) The World produces about 40 million tonnes of palm oil per annum. Out of which more than 85% is produced by Malaysia and Indonesia combined. Malaysia has taken a lead to produce Sustainable Palm Oil (SPO) to counter NGO propaganda. The momentum for production of SPO is yet to geared up. The producing and exporting countries have to take some measures to encourage the production which is linked with the exports. I would like to make suggestions to Palm Oil Producing countries Indonesia and Malaysia.
Indonesia has imposed the export duty on CPO at 15% and Malaysia has fixed the quota for exports of CPO. These two regulations can be relaxed to promote SPO. Indonesia may allow exports of SPO at lower duty than normal duty of CPO and Malaysia may place SPO out of quota. I am sure if these are done, will encourage the production and exports of SPO and support RSPO movement.
India – a growth Market for Pam Products: The world produces about 40 million tons of Palm Oil per annum. India consumes over 4.5 million tons Palm Oil and other Palm Oil Products per annum, while domestic production of Crude Palm Oil in India is hardly 60,000 tons per annum and rising very slowly. Palm Oil is very well accepted by the Consumers & Bulk users in India, thanks to the efforts made by the Malaysian Palm Oil Council (MPOC) in the last two decades to popularise Palm Oil as good cooking oil in India. CPO mainly imported from Indonesia while RBD Olein from Malaysia.
India will continue to be large importer of palm oil for quite some time - at least for next 10 years - because domestic output growth is unlikely to catch up with demand growth. Strong GDP growth contributed mainly by Manufacturing and Service sectors and also rising population automatically translates to higher demand for a host of food products including edible oils.
How much of this incremental import demand palm oil will be able to garner would of course depend on relative prices of various oils and tariff structure and landed cost. It would be in palm oil producers' interest to look at India as a large market that is going to be available for a very long-term - for long years - and do all that is required to sustain and service it.
As regards price outlook, let me say, India is a price-conscious market. The share of various oils will depend on relative prices and attractiveness of import. There is also the possibility of a reduction in import duty on oilseeds that may change the fundamental picture and projection for the import of vegetable oils by India.
Friends, I have attempted to share my thoughts and views on India as a major market for vegetable oil in general and palm oil in particular. No one has any doubt about India’s growth prospects. The latest mantra of the Indian Government is ‘Inclusive Growth’.
It means that the fruits of economic growth must flow to the entire country – to the One Billion plus population. In the process, the government may face conflict between meeting domestic compulsions and fulfilling international obligations. But such conflicts are bound to be of short duration. What is certain is that over the medium to long-term horizon, India will be a major growth market that our trading partners will continue to enjoy doing business with.
(B V Mehta is Executive Director, Solvent Extractors Association of India, Speech delivered at India Malaysia Palmoil Trade Fair, Mumbai, on May 29)
