India, the world’s largest cooking oil consumer after China, is poised to increase taxes on imports at least twice this year to protect oilseed growers, according to Dorab Mistry, director at Godrej International Ltd.
The tax on unprocessed oils will probably be increased to 10 percent by April or May from 2.5 percent, and then double to 20 percent by August or September, said Mistry, who last November correctly predicted that the tariff would be introduced. The duty on refined oils may be first raised to 17.5 percent from 7.5 percent and later to 27.5 percent, he said.
India’s imports of palm and soybean oils surged to a record in January as refiners boosted purchases before the tax was imposed on crude cooking oils for the first time since 2008, boosting inventories to a record. Domestic stockpiles may total almost 2 million metric tons, about 80 percent more than a year earlier, Mistry said.
“Provincial elections are soon due in the rapeseed state of Rajasthan and the soybean state of Madhya Pradesh and therefore these hikes may come sooner than I am forecasting,” Mistry, who’s traded palm oil for more than 30 years, told the Palm and Lauric Oils Conference & Exhibition in Kuala Lumpur today. “India is carrying record stocks of imported oils as well as record stocks of domestic oilseeds.”
Palm oil, used in foods, biofuels and cosmetics, has tumbled 25 percent in the past year in Kuala Lumpur, falling to a three-year low of 2,217 ringgit ($715) on Dec. 13, on concern that supplies will exceed demand. The contract for delivery in May ended unchanged at 2,400 ringgit a ton on the Malaysia Derivatives Exchange today.
India’s imports of edible and non-edible oils will reach a record 10.9 million tons in the year that began Nov. 1, Mistry said. Inventories of vegetable oils surged to a record 1.75 million tons after imports climbed 27 percent to 2.77 million tons in the three months ended Jan. 31, the Solvent Extractors’ Association of India said Feb. 14.
A tax increase “will be good for refiners and farmers,” said B.V. Mehta, executive director of the association, which has sought an increase in the levies. “We will be pursuing this with the government. The government is still concerned about inflation even though we have pointed out that food inflation is the lowest.”
India meets more than 50 percent of its cooking oil demand through imports of mostly palm from Indonesia and Malaysia, and soybean oil from Brazil and Argentina. Consumption will expand 6 percent to 17.5 million tons this year due to rising population and disposable incomes, according to the association.