Indian domestic capacity cut to below 30%
May 08, 2019
India’s domestic oilseed crushing and refining industry has cut operating capacity to historic lows as a result of a surge in cheap vegetable oil imports, the Business Standard said on 17 April.
The industry’s Solvent Extractors’ Association (SEA) reported a 26% jump in India’s vegetable oil imports to 1.45M tonnes in March 2019 against 1.15M tonnes in March 2018.
“Since the imported refined oil is cheaper than the domestic counterpart, packaging units prefer to buy refined oil from overseas suppliers and pack in local units for a safe profit margin,” the Business Standard wrote. “Consequently, domestic refineries have been forced to reduce their operating capacity to a historic low of below 30%.”
The share of refined oil in overall imports had also risen from 14% in January, to 20% in February and 22% in March.
“With profit margins narrowing for processing crude palm oil (CPO) in domestic refineries, Indian processing units are focusing on importing more refined oil,” the Business Standard said.
India reduced the import duty on Malaysian refined, bleached and deodorised (RBD) palm oil to 49.5% in January 2019, and to 44% for CPO.
The import duty on Indonesia RBD palm oil and CPO was also lowered to 59.4% and 48.4% respectively.
The country should equalise the import duty on RBD palm olein between Malaysia and Indonesia, the Business Standard quoted Godrej International director Dorab Mistry as saying.
“The SEA’s proposal to lower the import duty on CPO from the existing 40% to 35% is also a win-win situation for the edible oil industry.”
SEA executive director B V Mehta said the rise in edible oil imports, especially of RBD olein, was sounding the death knell of the palm oil refining industry in India.
“There is an urgent need to create a duty difference of 10% between CPO and RBD olein, he added.