The government has reduced the duty on imports of crude palm oil to 37.5 percent from 40 percent and refined palm oil to 45 percent from 50 percent effective from Wednesday. The import duty has been cut under the ASEAN agreement and as per New Delhi’s deal with the Malaysian government.

The move, however, hasn’t been received well by the domestic edible oil sector, particularly the duty differential that has gone down to 7.50 percent between these two palm oils. Industry had been asking for 15 percent as a safeguard for the domestic refining industry.

Describing the move a “double whammy, Atul Chaturvedi, President of the Mumbai-based Solvent Extractors' Association of India (SEA) told CNBC-TV18, “For us it is like a double whammy. First and foremost as far as the industry is concerned the differential we were anticipating will become 16 percent but now it is from 10 percent to 7.50 percent. Most of the palm refining industries is going to be in serious trouble. We could probably see a flood of palmolein or the refined plam oil in our markets contrary to our Make in India vision.”

Chaturvedi said the move will adversely impact farmers as well as deprive the government of duties which could have been used for the development of the oilseed sector.

“It is not good for the Indian oilseed farmer as well, because Indian oilseed farmers over the years have become very disillusioned with the results that you would see, that oilseed cultivation or production in the country has stagnated for almost two decades. This we felt was the golden opportunity as far as the government is concerned because now with the world prices at high, the customs duty would have gone up. Our back of the envelope calculation tells us that the government could actually end up getting duty in excess of Rs 40,000 crore as against Rs 30,000 which they are getting now. So the excess money which the government would have got could be have been ploughed back into the oilseed development,” he said.

Talking about the industry’s expectations from the government, Chaturvedi said, “We are still trying to convince the government. Yes, there are tricky obligations which are difficult to renege on but there are certainly lot many options available with the government in terms of non-tariff barriers. If you cannot avoid bringing down the duty at least then ensure that refined oils which come into the country are of minimum 5 kg, instead of the bulk refined oils coming into the country better regulate it through this methodology. So that can possibly reduce the quantum.”

India relies on imports for 70 percent of its edible oil consumption, up from 44 percent in 2001/02. Palm oil accounts for nearly two-thirds of India’s edible oil imports of around 15 million tonnes, according to data compiled by SEA.

India’s palm oil imports fell 3 percent in November from a year ago to the lowest level in 17 months.

Indonesia and Malaysia, the top two palm oil producers, were seeking a reduction in the Indian import tax to cut inventories. Palm oil competes with soyoil and sunflower oil in Indian markets.

India on Tuesday kept import tax on soyoil and sunflower oil unchanged, which could make imports of palm oil more attractive, said Sandeep Bajoria, chief executive of the Sunvin Group, a Mumbai-based vegetable oil importer.