Maharashtra - Traders against cut in customs duty on edible oil

Edible oil trade bodies have asked the government to keep the Customs duty on edible oils unchanged to boost the oilseeds production and reduce the dependence on imports. The Central Organisation for Oil Industry and Trade (COOIT) chairman Davish Jain said at a time when the mustard seed harvest has started, the government should not give any signals of reducing the import duties as it will discourage the farmer.

Harvest of mustard crop has started in Rajasthan, Gujarat and parts of Madhya Pradesh. Mustard seed production is expected to hover around 50 lakh tonne against around 57 lakh tonne last year due to fall in acreage.

Mr Jain further pointed out that in the past whenever the government reduced the import duties foreign edible oil suppliers increased export prices due to which neither the consumer nor the importer were benefited.

COOIT in a representation to the finance ministry recently has requested that the Customs duty on edible oil is effectively less than 20% and a further reduction will discourage the farmers to grow oilseeds. At present, the effective duty on crude palm oil is 46.35% and crude soybean oil is 40% but taking into account the low tariff value against the current prices, both the duties are well below 20%.

With a significant cut in crude palm oil duties, imports are increasing and according to recent figures by the solvent extractors association, import of palm oil during November 2007 to January 2008 rose by 13% to 990,453 tonne compared to 737,528 tonne during the corresponding period of last year. Soft oil import, that majorly constitutes soya oil, fell to 91,250 tonne compared to 194,686 tonne in the year-ago period.

Solvent extractors association’s B V Mehta said reduction of duty is not the solution and the government should instead subsidise the edible oil and utilise the revenues it generates from the import duties. Mr Mehta said the government should ask the state governments to remove the 4% VAT on the edible oil. “When there is no VAT on the essential commodities like wheat and pulses, why is there VAT on edible oil,” Mr Mehta said.

Source : Economic Times - Gurgaon, Haryana, India, dated 15/02/2008