February 9 2004 - INDIA may cut its 70 per cent import duty on processedpalm oil to alleviate high domestic prices and provide relief toconsumers.

Traders said Indian refiners are also facing difficulty sourcing for crudevegetable oils due to their high domestic prices.

The Indian Government may provide some leeway to some of its 1,000refiners to import,” a trader told Business Times last Friday in KualaLumpur.

India produces and processes rapeseed, groundnut, soyabean, khariff,cotton and rabi oils, among others.

The Indian Government is expected to make a decision on the matter whentabling its federal budget for 2004 in Parliament by the end of thismonth.

In May last year, India cut the basic import duty on refined, bleached anddeodorised (RBD) palm oil to 70 per cent from 85 per cent.

The move was made to narrow the price differential between RBD palm oil,crude palm oil (CPO) and soyabean oil. CPO and soyabean oil are currentlysubject to a basic import duty of 65 per cent and 45 per centrespectively.

India revises its import duties on CPO and processed palm oil severaltimes a year, depending on market conditions to protect its farmers aswell as the domestic refining sector.

However, India may raise the duty on imported RBD palm oil to 85 per centfrom 70 per cent to protect its farmers further, said another trader.

The cut in processed palm oil augurs well for Malaysia because it isprimarily an exporter of refined palm oil, compared with Indonesia whichis primarily an exporter of CPO, an industry observer said.

He added that Malaysia has an advantage over Indonesia because itsrefining sector is much more active and developed.

Malaysia’s plantation companies are also known to emphasise research anddevelopment activities to develop new palm oil products, while Indonesiajust follows Malaysia’s trail, said a trader.

India, whose domestic production of vegetable oils of 5.4 million tonnesin 2002 did not match its domestic demand of 11 million tonnes, wasMalaysia’s third largest buyer of palm oil in 2003.

The subcontinent bought 1.5 million tonnes, or 12.2 per cent, of Malaysia’s total palm oil exports last year. China was the top buyer at 2.5 milliontonnes, followed by the European Union at 1.6 million tonnes.

Malaysia is the world’s largest producer of CPO and its related products,accounting for more than half of the world’s output. The country produced13.3 million tonnes last year, of which 12.2 million tonnes worth aboutRM25 billion were exported to about 140 countries.

On the Malaysia Derivatives Exchange Bhd, palm oil futures for thebenchmark third month April delivery gained RM40 to close at RM1,830 atonne last Friday.

The overall volume more than doubled to 5,698 lots from 2,569 lots lastThursday.