18/4/07 (The Economic Times)  -  NEW DELHI: The reason behind the sharp decline in import duties on edible oil in the last few months may go beyond the government’s attempt towards controlling inflation. The move may also be aimed at appeasing Malaysia and Indonesia — both major exporters of palm oil and prime players in the Asean grouping — for the smooth conclusion of the long-pending India-Asean free trade agreement (FTA).

Speaking to ET, trade experts pointed out that Malaysia has made it clear to India in the course of the FTA negotiations that the deal might not come through if it doesn’t see a substantial improvement in market access for palm oil. In the course of the negotiations, Asean had demanded that duties on palm oil should be pruned to 30-40% within five years of the implementation of the agreement instead of 50% within 10-12 years as suggested by India.

In January, the government reduced duties on refined palm oil sharply to 67.5% from 80% and on crude palm oil and palmolein to 60% from 70% — which did not prove enough to satisfy Asean. Despite efforts by India, the FTA could not be concluded at the Asean summit in February.
India views the trade pact as a vital step towards increasing its political clout in Asia.