MARKET DEVELOPMENT
08-08-2001
Indian government to fix 'tariff values' for palm
NEW DELHI, Aug. 4. (Soyatech via NewsEdge Corporation) In a bid to tacklerampant under-invoicing of prices by edible oil importers, the Governmenthas decided to fix 'tariff values' for assessing customs duty liability at$337 per tonne for crude palm oil, $351 per tonne for RBD palm oil and$372 per tonne for RBD palmolein. These rates, all of which correspond tofree-on-board (f.o.b.) levels (Malaysia), will be officially gazetted in aday or two, according to reliable sources.Fixation of the above tariff values, in effect, would mean that importerscannot declare an f.o.b. rate below these levels for the purpose ofpayment of customs duty.Adding an average freight cost of around $25 per tonne from Malaysia, thecost & freight value of the palm complex (on which the duty is imposed)would work out to roughly $360 per tonne for crude palm oil, $375 pertonne for RBD palm oil and $395 per tonne for RBD palmolein.The sources told Business Line that the tariff values have been determinedon the basis of the 'actual' international prices prevailing now.Currently, Malaysian futures contracts for August/September are trading at$338 per tonne for crude palm oil, $357.5 per tonne for RBD palm oil and$380 per tonne for RBD palmolein (all f.o.b).The decision to fix tariff values was taken in the context of the hugevolatility in international palm oil prices. Only a month ago, RBDpalmolein was being offered in Malaysia at $265 per tonne and crude palmoil at $225 per tonne.In other words, prices have soared by roughly $100 per tonne in hardly25-30 days. "In such a volatile scenario, the incentive forunder-invoicing is high and there is room for importers to cough up lowerduty by simply backdating their consignments," sources said.The increase in global palm oil prices is even more pronounced whencompared to the levels of February 2001, when these averaged a low of $188per tonne for crude palm oil and $204 per tonne for RBD palmolein.It is not clear whether the Government has determined similar tariffvalues for other oils too, particularly soyabean, sunflower andrapeseed-mustard (canola). But according to sources, there is no immediaterequirement to fix tariff values for these soft oils, considering thattheir imports are relatively less compared to the palm complex.During the current oil year from November 2000 to June 2001, the country'stotal edible oil imports amounted to 29.71 lakh tonnes (l.t.), of whichthe palm complex accounted for 20.62 l.t., i.e. over 69 per cent.Moreover, prices of soft oils have not firmed up to the extent as that ofpalm oil. The difference between the landed price of crude degummed soyaoil and crude palm oil has fallen from around $100 per tonne in Februaryto less than $70 per tonne now.The fixation of 'reasonable' tariff values may also give the Government anopportunity to reduce the basic customs duty on crude palm oil from theexisting 75 per cent, as per the 'commitment' given to Malaysia followingthe Prime Minister, Mr Atal Bihari Vajpayee's visit to that country inMay.A 75 per cent duty on crude palm oil at the proposed tariff value ofaround $360 per tonne (c&f) would translate into a domestic price ofnearly Rs 30 per kg.A 10 per cent duty reduction would bring this down to about Rs 28 per kg,which is not expected to cause any major problems for the domestic solventextraction industry, which has been vociferous in its complaints ofunder-invoicing by importers.
