MARKET DEVELOPMENT
Immediate Negative Reaction From India Raising Import Taxes on Crude and Refined Vegetable Oils
Immediate Negative Reaction From India Raising Import Taxes on Crude and Refined Vegetable Oils
22/09/2015 (Borneo Post) - Analysts expect an immediate negative reaction towards India raising its import taxes on crude and refined vegetable oils by five percentage points (ppt).
Nevertheless, RHB Research Institute Sdn Bhd (RHB Research) said India’s long-term demand remains intact due to the disappointing monsoon rains being experienced this season caused by El Nino.
India has raised import taxes on crude and refined vegetable oils by five per cent. The tax on crude vegetable oils has been hiked to 12.5 per cent, while tax on refined oils has been raised to 20 per cent.
This move, it said, is to protect local soybean farmers as well as the local edible oil refining industry noted the research house.
“In the last 20 years, India’s edible oil output has risen only about a 30 per cent, while imports of vegetable oils have surged twelvefold to 14.4 million tonnes to keep pace with growing consumption, making India the world’s top buyer of cooking oils,” it said in a report yesterday.
According to Reuters, the cost of the edible oils imports are expected to rise about 40 per cent to US$14 billion this year, driving several Indian mills out of business and forcing some farmers to switch to crops other than oilseeds such as soybeans.
“While we expect an immediate negative reaction to this news, we believe the Indian market has already expected this move for a while now and could have stocked up beforehand, based on the 15.8 per cent on year rise in Indian palm oil imports from Malaysia in year to date August 2015.
“Given that there was no change to the differential of rates between crude and refined oil imports, there is unlikely to be a switching of imports between crude and refined oils,” said RHB Research.
“We believe India will likely continue its large imports of palm oil after a short hiatus, as it may not have a choice. The Indian monsoon has been a disappointing one thus far.”
Nevertheless, RHB Research Institute Sdn Bhd (RHB Research) said India’s long-term demand remains intact due to the disappointing monsoon rains being experienced this season caused by El Nino.
India has raised import taxes on crude and refined vegetable oils by five per cent. The tax on crude vegetable oils has been hiked to 12.5 per cent, while tax on refined oils has been raised to 20 per cent.
This move, it said, is to protect local soybean farmers as well as the local edible oil refining industry noted the research house.
“In the last 20 years, India’s edible oil output has risen only about a 30 per cent, while imports of vegetable oils have surged twelvefold to 14.4 million tonnes to keep pace with growing consumption, making India the world’s top buyer of cooking oils,” it said in a report yesterday.
According to Reuters, the cost of the edible oils imports are expected to rise about 40 per cent to US$14 billion this year, driving several Indian mills out of business and forcing some farmers to switch to crops other than oilseeds such as soybeans.
“While we expect an immediate negative reaction to this news, we believe the Indian market has already expected this move for a while now and could have stocked up beforehand, based on the 15.8 per cent on year rise in Indian palm oil imports from Malaysia in year to date August 2015.
“Given that there was no change to the differential of rates between crude and refined oil imports, there is unlikely to be a switching of imports between crude and refined oils,” said RHB Research.
“We believe India will likely continue its large imports of palm oil after a short hiatus, as it may not have a choice. The Indian monsoon has been a disappointing one thus far.”