8/10/04, INDIA (Oilmandi) - Don’t blame the monsoons for more expensiveedible oils. Every consumer is paying an extra Rs 3-Rs 7 a kg extra forcooking oils only because the government has asked Customs to levy importduty on a price that is more than $100 per tonne higher than what isactually paid by the importer.

As palm oil is the cheapest cooking medium in the country, its higherprices impact the poorest households first. But soya, the current hotfavourite in branded oils, is no better off.

Consumers are paying more than Rs 1.50a kg extra because the financeministry is using import duty as a revenue mopping opportunity. Afterpetroleum, edible oils are the biggest item on the country’s import bill.

Domestic importers are buying crude palm oil for $420 per tonne. If theypay import duty at this price level, the oil lands into India at Rs 14.67a kg. However, because the finance ministry has not revised the tariffvalue of $523 per tonne fixed in November last year, it enters India at Rs18.23/kg. This Rs 3.50 a kg extra is immediately passed on to consumers.

In soyabean oil, the actual international price is around $573 per tonne,while the tariff value last revised in May is fixed at $628 per tonne.This forces the oil to reach consumers at Rs 13.14 a kg instead of theactual Rs 11.99 a kg.

As sunflower oil is the only variant for which the finance ministry doesnot fix a tariff value, there is now a strong likelihood that there willbe rampant undervoicing by importers to make a killing with the 1.40 lakhtonnes oil they are bringing in under the TRQ scheme with a concessionalduty.

The tariff value method was imposed on edible oils by the finance ministryto curb underinvoicing by traders. And it was successful in ensuring thatimporters did not make excess profits by not paying up the actual quantumof duty. However, under the tariff duty mechanism, the finance ministry isalso duty-bound to track the market price of imported oils and align itsown tariff values with them.

Ideally, this alignment ought to be done automatically at the beginning ofeach month to prevent speculation or harassment of genuine importers. Butthe finance ministry appears to have not detected any discernible trend incrude palm oil prices in the last 10 months to warrant a revision in thenumbers.

There is a general view in the ministry that as consumers are still notcomplaining about higher prices, it is all right to continue mopping upmore revenue by using an outdated tariff value. But a crisis is slowlylooming in the market because pipelines are drying up fast, a source said.

Most large importers are reluctant to contract and ship in largequantities because they are on tenterhooks about an impending change intariff value. Importers prefer to hold their cargo at port if there iseven a whiff that the value might change. This speculation and completelack of transparency in government functioning is further exacerbating thesituation, the source added.