India reduces import duty on palm oil imports to lower edible oil prices
29.06.2021 (www.spglobal.com) - India has cut its basic import duty on crude palm oil (CPO) to 10% from 15% effective from June 30 for a period of three months, according to a notification from India's Ministry of Finance on June 29.
Including the additional Agri Cess of 17.5% and a 10% Social Welfare Cess, the reduction will bring down the effective tax rate on CPO to 30.25% from the earlier 35.75%.
This move will bring down the retail prices of edible oils, India's Central Board of Indirect Taxes and Customs, the nodal body for all imports, said.
The new tax regime will be in force until the end of September 2021, the government said. The news comes close on the heels of a cut in export tax and levy from Indonesia – the largest producer of palm oil.
"India will buy more palm oil in the next two months," Sandeep Bajoria, CEO of vegetable oil brokerage Sunvin group said following the announcement.
India's palm oil imports -- which account for roughly 60% of its total vegetable oil imports -- fell from 9.4 million mt in 2019 to 7.21 million mt in 2020, and will mostly stay at those levels in 2021, industry participants had said earlier in 2021.
CPO CFR West Coast India assessments have risen to $962.50/mt on June 28, up from $527.50/mt on May 5, 2020. The grade touched a multi-year high of $1255/mt on May 12, 2021.
"Spot and future prices on the benchmark Bursa Malaysia Derivatives exchange can rise by MR100 – MR150 ($24.09-$36.13) tomorrow," Aditya Jeripotla, head of the edible oils and oilseeds division at commodity research company TransGraph said.
India is the world's largest buyer of vegetable oils, but in 2021 imports have been mostly hand-to-mouth as palm oil and soy oil prices have more than doubled in the last year. This along with lockdowns due to multiple waves of COVID infections have dampened India's imports in 2020 and 2021.
Currently India's palm oil demand depends solely on crude palm oil prices in the international markets, industry watchers told S&P Global Platts.