Rising vegetable oil imports irk producers

Industry says traders from Bangladesh over-invoice exports to India to show 30% value addition

The rising share of vegetable oil imports from neighbouring countries that are not known to produce any, has irked edible oil producers.

Over the past two months, soft oil (soybean, sunflower and rapeseed/mustard) is being imported in large quantity from Bangladesh, Sri Lanka, Nepal and Bhutan at zero duty under the South Asian Free Trade Area (Safta). This is in contrast to the traditional import of palm oil (crude palm oil or CPO and refined oil or RBD) directly from Indonesia and Malaysia.

Domestic producers say this is a breach of the rules on origin which mandates 30 per cent of value addition under the Safta agreement. They have met officials in the Union finance ministry with a request to put edible oil and vanaspati in the negative or barred list of such import.

“Cheap import of refined oils and vanaspati from Ssfta member countries are resulting in distorted domestic refined oil prices, leading to pressure on crop prices and in turn hurting farmers’ income. The government also stands to lose revenue. We, therefore, urge the government to take immediate steps to check their import,” said Atul Chaturvedi, president, Solvent Extractors’ Association (SEA).

Data from the SEA shows the import of soft oil in May and June had risen to 60 per cent and 52 per cent, respectively, of total vegetable oil import of 1.25 million tonnes and 1.01 mt. In earlier months, the average share of soft oil in total vegetable oil import was 32-33 per cent.

On March 1, the Government of India increased the import duty on CPO from 33 per cent to 48.4 per cent. Subsequently, on June 14, duty on soft oils was increased to 38.5 per cent. The move was undertaken to help farmers. But, prices of soybean, for example, have declined by 6.4 per cent since April, to trade currently at ~3,538 a quintal. Sunflower seed price has declined by 3.7 per cent to ~3,900 a qtl since April.

“At the current tariff value of $613 a tonne for refined palmolein, the amount of customs duty works out to ~24,957 a tonne. The current Indore price of refined soybean oil stands at ~74,500 a tonne, while the same oil imported from Bangladesh at zero duty at $930 works out to ~63,742 a tonne or cheaper by about ~11,000 a tonne,” said Davish Jain, chairman, Soybean Processors’ Association.

The industry contends that traders in neighbouring countries, primarily in Bangladesh, have been under-invoicing imported vegetable oil from the primary producing countries of Indonesia, Malaysia and Argentina, and then over-invoicing their export to India to show 30 per cent of value addition.