May 27 (Bloomberg) -- The oilseed industry in India, the world’s biggest importer of cooking oils, expects the new government led by Narendra Modi to increase duties, according to Dorab Mistry, director at Godrej International Ltd.
Purchases of oils have expanded with a greater proportion in the form of fully processed products because Indonesia and Malaysia impose heavy duties on shipments of crude palm, Mistry said. Most people in the Indian industry want Modi to raise the import tax on crude palm to 5 percent and increase the duty on processed products to 20 percent, he said by e-mail.
Modi, 63, won the election after promising a stronger economy, more jobs and better roads. His Bharatiya Janata Party won 282 seats of the 543 available, ousting the Congress party which ruled independent India for most of its history. Modi, sworn in as prime minister yesterday, has a profound knowledge of agriculture and its issues, having improved the industry in his home state of Gujarat, Mistry said.
“History has taught us that when India raises import duties, the export prices of these products fall – such is India’s dominant position as the world’s largest importer of vegetable oil,” Mistry said in the e-mail to Bloomberg. “The burden of that import duty will fall on the producer countries. And they are well equipped to take up that cost.”
The government in January increased the duty on imports of refined cooking oils to 10 percent from 7.5 percent to protect domestic refiners and farmers from a surge in shipments of processed palm oil from Indonesia and Malaysia, the world’s biggest producers. Imports of the crude variety are tax free.
Inbound shipments of crude and refined palm oil advanced 6.5 percent to 519,222 metric tons in April from a year earlier, the Solvent Extractors’ Association of India said on May 14. The country meets more than 50 percent of its demand through imports, shipping palm from Indonesia and Malaysia, and soybean oil from the U.S., Brazil and Argentina.
“India’s refining industry remains under-utilized and in many cases, idle,” said Mistry, who’s traded palm oil for more than three decades. The oleochemicals manufacturing industry “remains starved of raw material” and low import duties made oilseeds less profitable for farmers, he said.
Mistry suggested setting a minimum sale price for castorseed and a minimum export rate for castor oil to help farmers.