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Palm Oil Declines as India Changes Calculation of Import Taxes

Palm oil dropped for the first time in three days as India ended a freeze on the taxable value of cooking oil imports and said it will revise it fortnightly on the basis of world prices, a move that will push up duties.

The contract for delivery in April, which has the largest volume, fell 2.1 percent to 2,378 ringgit ($789) a metric ton at the close on the Malaysia Derivatives Exchange after declining as much as 2.2 percent earlier.

Stockpiles in Malaysia jumped to an all-time high of 2.63 million tons in December, according to the palm oil board. Exports tumbled 21 percent to 570,510 tons in the first 15 days of this month, Intertek said Jan. 15. The taxable value of crude palm oil imports in India has been $447 a ton since 2006, well below international prices now and the government said the change will have a “positive impact” on duty collection. The move may also hurt demand for palm oil.

“That will raise the import costs for palm oil in India,” Faiyaz Hudani, an analyst at Kotak Commodity Services, said by phone from Mumbai today. “It will further hurt global demand for palm oil but the impact will be short-lived” as crude palm oil is extremely cheap compared with domestic soybean oil, he said.

The ending of the freeze also applies to soybean oil which has a taxable value now of $580 a ton, according to the government. The move comes after Malaysia set the tariff on crude palm oil exports at zero for a second month in February.

Inventories Expand

Stockpiles in Indonesia, the biggest producer, may gain to 3.5 million tons in January from 3.25 million tons a month earlier, according to the median of estimates from two plantation companies, a refiner and an analyst compiled by Bloomberg. Shipments may decline 0.6 percent to 1.54 million tons, while output is stable at 2.5 million tons, the medians of estimates from the same four respondents and a third plantation company showed.

Indonesia’s Trade Minister Gita Wirjawan said Jan. 11 that the government is considering a cut in its export tax to compete with Malaysia and “ideally” the tariff should be zero.

Refined palm oil for delivery in May fell 0.9 percent to end at 6,712 yuan ($1,080) a ton on the Dalian Commodity Exchange. Soybean oil for September rose 0.1 percent to close at 8,676 yuan a ton.

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