23/03/2008 (The Hindu Business Line) - The Centre’s move to cut the Customs duty on all edible oils helped crude palm oil on Malaysia Derivatives Exchange on Friday. When the trade opened, the benchmark June contracts declined 133 ringgits or four per cent compared with its previous closing. The fall was mainly on account of the drop witnessed in soyabean on the Chicago Board of Trade. However, as the impact of Indian move sunk, crude palm oil recovered to end unchanged.

On Thursday, the Centre cut the import duty by 25 percentage points on all crude oils to 20 per cent and of refined oils to 27.5 per cent.

Analysts and experts question the timing of the duty cut. In fact, the cut is unlikely to benefit the customers as producers abroad are likely to take advantage of this.

Advantage Malaysia
“Whenever the Centre has cut the Customs duty, vegetable oil prices, especially crude palm oil, have gone up. Malaysia, in particular, has gained more than Indian customers,” says Mr Ambi Sivaramakrishnan, an analyst.

However, industry sources, while maintaining that prices had not declined from earlier duty cuts, say they have helped in keeping the rise in leash. “For example, if crude palm oil has increased by nearly 90 per cent in the past year, domestic prices have increased by around 50 per cent only,” they say.

This is mainly because apart from cutting the duty, the Centre has kept the tariff values, which serve as the base price for working out duties, unchanged since July 2006. For example, the tariff value of crude palm oil has been stable at $447 a tonne. Had the tariff value been pegged at current value of crude palm oil, then its landed cost would have been around Rs 51,000 a tonne. However, in view of the static tariff, the landed price is around Rs 46,000.

Analysts feel the duty cut should have come around the first week of March, when vegetable oils price peaked. Since the first week of March, prices of all edible oils have declined by over 10 per cent on slack demand and fears of fall in offtake.