26/09/2011 (The News International) - Global edible oil traders are anxiously awaiting top buyer India’s response to lower export taxes from major palm oil producer Indonesia after bitter complaints from local refiners that they would soon be out of business.

At the annual Globoil industry meeting that starts in Mumbai on Friday, the La Nina weather pattern is also expected to be a dominant topic after forecasts it will inundate Southeast Asia the biggest palm oil producing region in a few months, possibly reducing output as demand from China and India rises.

Output so far has been strong with exports from top producer Indonesia seen at 17 million tonnes in 2011. India, a top buyer, picks up the bulk of its 6 million tonnes of annual crude palm oil imports from Indonesia.

By slashing export taxes, Indonesian refined palm oil has become more attractive than crude, prompting some traders in India to shift their orders, raising concerns about the future of India’s 15-million-tonne refining industry.

“The tax issue is key for us. Solvent extractors in India are facing serious problems. We are demanding the government to raise the import tax,” said B.V. Mehta, executive director of the Solvent Extractors’ Association of India.

“Edible oil demand-supply, price outlook amid uncertain weather conditions will also remain in focus at the conference,” he added. The Globoil India 2011 conference ends on Sunday.

With food inflation in Asia’s third largest economy stubbornly high despite 12 rate hikes in the last 18 months, markets will watch out for any clues on what India plans to do, including a possible increase of import duties.

Food Minister K V Thomas, who is attending the conference, has said he was “apprehensive” about cheaper refined palm oil imports from Indonesia, but has so far stopped short of giving in to demands to hike import taxes.

Government and industry sources have said India was considering an industry request to raise import duties on processed palm oil to prevent a “death blow” to the local refining industry, which is dominated by firms such as Godrej Industries and KS Oils.

A top Indian trade body has demanded the government raise import duties on refined palm oil to 16.5 percent from 7.7 percent now as well as raise the base price, or tariff value.

India has already begun importing more refined, bleached and deodorised (RBD) palm olein from Indonesia ahead of a major Hindu festival in October, Diwali, potentially leaving refining capacity idle.

If cheap palm oils flood the market, the already unpopular government may face a backlash from oilseed farmers who will have to sell their crops at cheaper prices, especially with bumper soybean and good rapeseed harvests expected.

Palm oil prices have fallen more than 20 percent this year, mainly due to concerns that global economic slowdown may stall commodity demand growth.

Prices, however, may see support from the return of La Nina-induced rains at the end of this year to Southeast Asia, a region that accounts for 90 percent of global palm oil output.

“Production is still doing well but yields are coming off a little in Indonesia,” said a planter in Indonesia who declined to be named as he is not authorised to speak to the media.