8/27/04 INDIA (Oilmandi) - RECENT news reports uncovering the highlyirregular clearance of edible oil consignments at lower rate of customsduty than applicable, especially in minor ports such as Bedi in Jamnagar(Gujarat), have unnerved many players.

What has for some time been suspected in trade circles is finally in theopen now. Some importers have allegedly been able to get away with dutyevasion by misdeclaring the quality of cargo (as crude, when theconsignment is not) often in collusion with officials in charge of revenueand quality inspection. This makes a mockery of the Ministry of Commerceand Industry notification issued June 14 whereby the Director-General ofForeign Trade notified a list of "high risk" items, imports of which willbe subject to 100 per cent sampling.

Even prior to this notification, imported edible oils were subject to 100per cent sampling. Currently, the rate of customs duty on crude palm oilis 65 per cent and that on refined palm oil 75 per cent ad-valorem. Inaddition, there is a stipulation relating to carotenoid content of thecrude oil.

The implications of the unscrupulous activity are serious. First and mostimportant, there is a huge loss of revenue for the exchequer. Second, thehighly competitive vegetable oil market gets distorted because of thepatently objectionable activities of a few. This prompts and occasionallyforces, even generally honest players to examine the undesirable option inorder to stay afloat in business.

What is the remedy? A serious rethink on allowing edible oil importsthrough all and sundry ports is necessary. Some restrictions may be inorder and are actually called for. It is not unreasonable to assume thatit is possible for influential importers to exploit human frailties,manipulate documents as well as officials and thereby obtain clearance atminor or smaller ports. Events at Bedi port strengthen the belief thatminor or smaller ports are not adequately geared in terms of manpower andtesting equipments for handling clearance of sensitive andrevenue-oriented cargoes such as edible oil.

In order to closely monitor imports and clearance, four years ago, theCentral Government had imposed restrictions on ports through which edibleoils could be imported. Six major ports that were fully equipped to handlelarge inflows were designated. But this order was hastily withdrawn as theentire oil trade was up in arms against the restriction and the Governmentbuckled.

As many as 15 ports including major and minor ports are currently utilisedby importers to bring in 45 lakh-50 lakh tonne of various vegetable oilsevery year. Some of the smaller ports include Nagapattinam, Tuticorin,Mangalore, Mundhra, and Bedi. For some time, Visakhapatnam, Paradeep andKarwar ports were also used.

Customs revenue generated from vegetable oil imports is estimated at closeto Rs 5,000 crore. If the Government is serious about preventing revenueloss and ensuring appropriate sampling and testing of imported vegetableoil consignments, some restriction on the point of entry is highlydesirable.

The ports through which cargoes may be allowed should be those withadequate manpower to handle documentation and attendant clearanceformalities in addition to qualified personnel and testing equipments toascertain quality.

The Government should not shy away from its responsibility to ensurestrict monitoring of imports. As far as edible oil is concerned, the issueis not restricted to mere misdeclaration of goods or payment of lower rateof duty.

Cases of adulteration, sale of substandard quality and palming offinferior oil as superior oil are said to be rampant.

In addition to monitoring imports through designated ports, there is needfor tighter food law enforcement. The food inspection officials must getcracking. A series of festivals over the next three months expands demandmanifold. It is the time to watch out for substandard oil.