2/1/06 Chennai (Business Line) - THE Union Government on Monday cut the tariff values on vegetable oils by $3-24 but the industry termed it as a "small reduction".

The revision comes after a gap of over 45 days and follows demand from the edible oil industry to revise the tariff rates to align with the market price. It also comes after the Finance Ministry issued a notification on December 16, saying there was no revision in the tariff then.

The tariff values are the prices set by the Union Finance Ministry from time to time to calculate the Customs duty on vegetable oils. The Centre began fixing the tariff values since August 2001 to check under-invoicing of edible oil imports.

The Centre levies 45 per cent Customs duty on crude soyabean oil, while it the duty is 65 per cent for crude palm oil and 75 per cent for other refined oils.

On Monday, the Government effected the steepest cut for RBD (refined, bleached and deodorised) palmolein by $24 a tonne to $421. Values for other palmolein were cut by $23 to $420. The lowest reduction has been for RBD palm oil by $3 to $432 and that of crude soyabean oil rate by $13 to $497. (See Table)

"There has been some small revision in the tariff values for palm oils and soyabean oil. Tariff for crude palm oil has been revised to $417 from $433. But the reduction does not reflect market price. In the international market, crude palm oil is ruling at $380 a tonne," said Mr Sandeep Bajoria, Chairman, Central Organisation for Oil Industry and Trade.

Asked what effect it would have on the domestic edible oil market, he said: "It is a small reduction and will have no effect on the prices. Prices are more or less likely to rule the same."

In the domestic market, RBD palmolein ended unchanged from the weekend close of Rs 368 for 10 kg. Degummed soyabean oil, on the other hand, closed Rs 30 a quintal lower at Rs 3,450.

"Even crude soyabean oil tariff is higher than the international price. It is quoted in $480.5 a tonne abroad," Mr Bajoria said.

According to the Solvent Extraction industry, the tariff values should reflect the international market price. For example, the difference between global price and tariff values for crude palm oil after the current reduction is $34.

As per estimates worked out by the Solvent Extractors Association of India, importers could pay over Rs 1,500 a tonne more as import duty. The Centre is yet to respond to the association's plea.

The tariff rate cut is at a time when vegetable oil imports are showing a tendency to decline. Vegetable oil imports are likely to dip this season (November 2005-October 2006) as the country's edible oil production is projected to rise. Kharif oilseeds output this year has been estimated at 133.7 lakh tonnes compared with 122.6 lakh tonnes last year, while vegetable oil production is seen at 48.5 lakh tonnes against 45.3 lakh tonnes last year. Besides, a record 84.9 lakh tonnes cottonseed oil and 6.5 lakh tonnes of copra are also projected to be available for consumption.

Still, edible oil imports are projected to remain unchanged at around 50 lakh tonnes this season.