Govt slashes duty in palm oil to control inflation

Mumbai, Apr 15: Market pundits today pointed out that in an effort to control inflation, the Centre has resorted to yet another round of import duty reduction in palm oil, following spiralling international prices.

The basic customs duty (BCD) on crude palm oil (CPO) and crude palmolein has been slashed from 60 to 50 per cent, while that on RBD (refined, bleached, deodorised) palm oil and RBD palmolein similarly come down from 67.5 to 57.5 per cent.

Taking into account the 3 per cent education cess, the effective duty cut works out to 51.5 per cent (from 61.8) for crude palm fractions and 59.225 per cent (from 69.525) for refined palm oils.

The BCD on palm oils were last revised on January 25, when the rates fell from 70 to 60 per cent for crude fractions and from 80 to 67.5 per cent for refined fractions.

It may be recalled here that in his 2007-08 Union Budget, Finance Minister P Chidambaram, had further done away with the special additional customs duty (SACD) of 4 per cent, which brought down the effective tariff incidence on crude palm to 61.8 per cent (from 67.6 of pre-Budget) and on refined fractions to 69.525 (from 75.6 of pre-Budget).

However, analysts observe that the minor duty tinkering in the Budget did not prove particularly helpful because of a steep increase in international prices, courtesy diversion of vegetable oils (particularly palm) for manufacture of bio-diesel. The landed price (cost&freight, Mumbai) of CPO is currently ruling at about USD 690 a tonne, as against USD 595-600 at the time of presentation of the Budget.

Significantly, while reducing the import duties, the Centre has simultaneously kept the tariff value on all edible oils frozen at their July 2006 levels. Simply put, it means the new effective duty of 51.5 per cent will be levied not on the actual landed CPO price of USD 690 per tonne, but on the lower tariff value of USD 447 per tonne. Likewise, the 59.225 per cent duty on RBD palmolein will be computed on a tariff value of USD 484 per tonne, and not the prevailing landed price of USD 720 per tonne.

The Centre has also left the BCDs for both crude (de-gummed) and refined soybean oils unchanged at their existing 45 per cent level, experts added .

UNI