8/2/07 (Economic Times)  -  MUMBAI: Rebutting a media report that imposition of excise duty on refined edible oils will help the exchequer garner Rs 700 crore (1 croce = 10 million) (RM560 million) annually, a trade body has said any gains accruing to the government would be offset by special additional duty (SAD) adjusted against excise.

According to AR Sharma, president of Solvent Extractors’ Association of India, the country imports 45 lakh  tonnes ( 1 lakh = 100 thousand) of edible oils, like crude palm oil and crude soyabean oil. Duty on CPO is 60% of the tariff value over-and-above which SAD is levied. Similarly, on crude soyabean oil, duty is 45% of tariff value plus the SAD.

Assuming tariff value of 100 for CPO, SAD of 4% will be calculated on 160, as 60% is the import duty. “If excise of Rs 1,000 (RM79) per tonne were levied, claiming of Modvat to the extent of actual excise duty payable by refiners/vanaspati units would shrink the net additions to revenue,” said Mr Sharma.

Consequently, SEA said in a missive to finance minister P Chidamabaram on Wednesday addition to the exchequer in real terms may be only on refining indigenous oils ie, soyabean oil, sunflowerseed oil and rice bran oil which is less than 20 lakh  tonnes per annum. According to Mr Sharma, excise duty on this would work out to Rs 200 crore (RM160 million).

“After providing input credit for excise paid on consumables/chemicals — like bleaching earth used in decolorisation of oil during the refining process — and also on duty paid on capital goods, total revenue generation may not be more than Rs 100 crore,”said Mr Sharma.

SEA has in the communique stated that if the question of continuing excise exemption is to be revisted on the grounds of additional revenue, a better course to achieve this objective would be by way of “suitable adjustments in import duty and alignment of tariff values with the realistic prevailing market prices.”

India consumes about 120 lakh tonnes of edible oils. Groundnut, rape-mustard and sesame constitute 65% of the total domestic availability and are mainly produced by small expellers and consumed in raw form (filtered oil).

Soybean oil, both imported and domestic, as well as imported palm oil and solvent extracted oils are refined and consumed. The overall refining of vegetable oils in the country, is about 50/55 lakh tonnes (1 lakh. Major refining units, says SEA, are located in Kandla(Kutch) and Kakinada enjoying excise exemption having inbuilt capacity of 35 lakh tonnes per annum.

These would not generate any revenue to the exchequer, being exempted but would create unhealthy competition and with the advantage of large capacity coupled with excise exemption benefit would threaten the survival of large number of small to medium scale refiners across the country.