A surge in the import of vegetable oils in India has prompted the domestic oilseed crushing and refining industry to reduced their operating capacity steadily to a historic low of below 30% in order to reduce their operating cost and make business viable.
According to the latest data from the Solvent Extractors’ Association (SEA), India’s import of vegetable oils (both crude palm oil or CPO and refined, bleached and deodorized or RBD) rose 26% to 1.45 million tonnes in March 2019 versus 1.15 million tonnes in the corresponding month last year. In February also, import of vegetable oil had risen by 7.4% to 1.24 million tonnes from 1.16 million tonnes in the comparable month a year ago.
Under the bilateral treaty with Malaysia, the government of India reduced effective import duty on RBD and CPO to 49.50% and 44% effective January 1, 2019 from 59.40% and 48.40% earlier. Also, Import duty on CPO and RBD from Indonesia declined to 44% and 55% effective January 1, 2019 from 48.40% and 59.40% earlier.
Since the imported refined oil is cheaper than the domestic counterpart, packaging units here prefer to buy refined oil from overseas suppliers. Consequently, domestic refineries have been forced to reduce their operating capacity.
Indian vegetable oil processing units are facing two major fundamental issues. First, the European Union has decided to suspend use of CPO in bio-fuel due to which major producing countries like Malaysia and Indonesia are now focusing on supply of refined oil. Eventually, the supply of both CPO and RBD has been diverted to alternate major consumers like India and China. Consequently, India is becoming a dumping ground for vegetable oils.