NEW DELHI, JAN 23: Budget 2005-06 is likely to restructure import tariffson oilseeds and edible oils. The ministry of consumer affairs has proposeda halving of the import duty on oilseeds to 15%. It has also recommendedrationalisation of the customs duties on edible oils, which would entaillowering duties on most products, according to senior officials.

The ministry has pointed out that the current 30% import duty on oilseedswould translate into a tax incidence of 90% on domestic refineries, giventhe 3:1 conversion ratio from oilseed to refined oil. This is even higherthan the duty incidence on imported refined edible oils, which ranges from45-75%.

"There is scope for reduction in import duty on oilseeds, without hurtingthe domestic farmers," a senior official from the ministry of consumeraffairs told FE. The ministry has also proposed (rationalisation) ofimport duties on crude and refined oils, he said, adding that the dutystructure would need to be conducive for optimum utilisation of domesticrefining capacities.

At present, capacity utilisation in India’s edible oil refining industryis quite low at about 40%. In addition to the tariff barrier, oilseedimports are also subject to strict quarantine norms. India depends onedible oil imports to the extent of 70% to meet its domestic requirements.Edible oils produced from local oilseeds meet only 30% of the domesticdemand for vegetable oils.

Currently, import duty on crude palm oil is 65% (ad valorem), while thaton refined oil was hiked to 75% in the last Budget. Mustard and rapeseedoils attract 70% duty, while refined soyabean oil is subject to 45% duty.

The vegetable oil industry had demanded that the customs duty be reducedto facilitate imports of oilseeds so that they can process oilseeds andutilise their rated capacity.

It wanted import duty reduced to a (reasonable level) so that the landedcost of imported seeds would be marginally above the MSPs for oilseeds.Such a situation will not affect the interests of farmers. The industryhad also demanded that the strict quarantine norms for regulating importsof oilseeds be relaxed.

Oilseeds output in kharif 2004 has declined to 154 lakh tonne against 170lakh tonne in kharif 2003. As the prospects of oilseeds output is notbright in the current kharif, the industry estimates output in 2004-05 todecline to around 220-225 lakh tonne against 251 lakh tonne last year.