7/22/04 (Oilmandi) - India - COMPLEXITIES in the duty structure of thevegetable oils industry, and objections arising there from, seem to benever ending. Differences in customs duty, quality of imported materialand in the integrity of players all make decision-making tough for revenueofficials.

While the Budget proposal to permit vegetable oils of industrial grade(containing more than 20 per cent free fatty acid) at a concessional rateof 20 per cent ad valorem customs duty for the production of fatty acidsand fatty alcohols in addition to use in soap manufacture has been widelywelcome by user industries, apprehension that the facility could bemisused by a few importers is gaining ground.

The potential for misuse of the concession arises because of theuncomfortably large differential in the rates of customs duty betweencrude oils of the palm group. Crude palm oil and palmolein of edible gradeattract 65 per cent duty, while the same oils of industrial grade (withminimum 20 per cent FFA content) will be charged duty at the rate of 20per cent ad valorem.

It is possible that unscrupulous processors can utilise high FFAindigenous ricebran oil for soap or other specified purpose; and importindustrial grade crude palm oil at lower duty, put the oil throughphysical refining and market it as edible oil. Such an operation willbring windfall gains.

In addition, unlike edible oils, there is no tariff value specified forvegetable oils of industrial grade; so, invoice manipulation possibilitiestoo exist, points out a trade intermediary.

Currently, industrial grade crude palm oil is offered at around $400 atonne cost-and-freight India, which translates to landed cost of a littleover Rs 22,000 a tonne.

In the Mumbai wholesale market, indigenous ricebran oil has been quotedsteady at Rs 240 per 10 kg trading lot since the Budget announcement.

Traders said it was too early to assess the negative impact of the Budgetproposal on ricebran oil, as sizeable volumes of imported industrial oilsare yet to arrive.

Revenue officials have a job on hand. They must tighten the inspectionprocedure for monitoring of imports and utilisation of industrial oils.

Actual user condition should be strictly enforced so that revenue loss isprevented and inferior oils are not palmed off to unwary consumers.