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Government unlikely to hike edible oil duties

The government is unlikely to raise import taxes on edible oils in next week's budget because of an expected fall in the domestic oilseeds crop and after three hikes in duties failed to stem a flood of cheap imports, analysts say.

But Finance Minister Yashwant Sinha might announce some incentives for farmers to boost production in the February 28 budget, they said.

"I don't expect any major change in the import duty structure, but Sinha may make some policy announcements to give a boost to the industry," one commodity analyst said.

The domestic industry has submitted a long wish list calling for higher duties on edible oils, lower duties on oilseeds, development funds, special exemptions for packaging materials and the withdrawal of excise duty on soy products.

Traders said the difference between crude and refined oils should be reduced to 20-25 per cent from about 36 per cent now.

Sandeep Bajoria, president of Solvent Extractors' Association of India, said import duty on oilseeds should be reduced to 15 per cent from 44 per cent to augment raw material availability.

At the same time, he said, the government should hike import duties on edible oils and use the additional revenue to increase productivity of oilseeds and support better use of technology.

"Oilseed production is declining, resulting in a shortage of raw material for processing, whereas imports of edible oils are increasing from year to year," he said.

Traders have also called for a withdrawal of an eight per cent excise duty on soy products to increase consumption.

But the industry has little support from other pressure groups, including political parties and farm bodies, and analysts expect many of its demands to pass unheard.

LOWER OILSEEDS OUTPUT SEEN

Analysts and traders said that a lower-than-anticipated oilseeds crops would deter the government from raising edible oil duties, particularly since any such hike could add to inflation.

Lack of moisture in Rajasthan, Maharashtra and Gujarat has affected the summer oilseeds crops, reducing the country's overall production.

Traders said production of summer oilseeds was likely to decline to 7.0 million tonnes in 2000/2001 (November-October) against 8.26 million tonnes in the previous year.

Total oilseeds production is estimated at about 18 million tonnes in 2000/2001 compared with about 19 million tonnes in 1999/2000, according to industry estimates.

Levies on edible oils have been raised three times since December 30, 1999, to try to regulate imports.

But this failed to have the desired effect of boosting domestic prices and output as exporters, notably Malaysia, lowered prices to offset the higher duties.

Lower import prices in turn artificially raised consumption of edible oils -- according to the agriculture ministry, 4.5 million tonnes of edible oils were imported in 1999/2000 when only 1.5 million were actually needed.

India, the world's leading vegetable oils buyer, imported 1.23 million tonnes of edible oils in November-January of 2000/2001 compared with 972,132 tonnes in the same period of the previous year.

Domestic prices of edible oils have declined despite increase in duties. Groundnut oil prices fell to Rs 33,500 per tonne in December from Rs 42,500 in July 2000.

Domestic prices of RBD palmolein and crude palm oil dipped to Rs 21,300 and Rs 14,441 respectively from Rs 22,000 and Rs 16,990 in July.

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