FTA to curb India from hiking palm oil import duty
Commodity Online | 30 August 2008
FTA to curb India from hiking palm oil import duty
NEW DELHI: The much-awaited free trade agreement of Asean nations is bound to affect import and export of several commodities in India.
The first one may be palm oil, which is a major commodity for India as it depends on Malaysia for its edible oil needs.
Following the FTA, India may not be able to hike the import duty on crude palm oil purchased from Malaysia and Indonesia above 37.5%.
The tariff proposals on the table are 37.5% for CPO and 45% for refined palm oil, a Malaysian government official said.
India and Asean finalized the agreement this week under which tariff cuts on several goods will start from January 2009.
India wanted a higher permissible limit for import duty on palm oils to protect its oilseed growers from a surge in cheap imports.
Malaysia and Indonesia favoured a lower tariff, as palm oil is their major export item and India is the world’s second largest importer by volume after China.
However, during the course of negotiations, India unilaterally brought down the import duty on crude palm oil in phases, to zero from 80% in the last two years, to keep a check on inflation. The import duty on refined palm oil has been brought down to 7.5% from 90%. Rules of the World Trade Organization allow member countries to levy an import duty on palm oils up to a maximum limit of 300%.
However, the upper limit, or bound rate, for import duty on soybean oil under WTO rules is 45%.
After the India-Asean FTA is implemented, the leeway India has had in altering import duty on palm oils, depending on international prices, will get curtailed.
India imports most of its palm oil requirements from Indonesia in crude form. Purchases from Malaysia are also on the rise after India’s government-run companies started importing higher volumes of refined palm oil since mid-April for a subsidized local program for lower-income households.
According to latest industry estimates, India imported 3.2 million metric tons of edible palm oil during the November- July period in 2007-08, up from 2.23 million tons a year earlier.
