Last year, capacity of domestic refining industry was 38-40 million tonnes but utilisation was only 18 million tonnes
A sharp increase in import of refined palm oil in the recent months is hurting the domestic oil refining industry, according to Solvent Extractor’s Association (SEA) of India.
In the last two months (Nov-Dec 2022), around 450,000 tonnes were shipped into India, depriving the domestic industry of capacity utilisation, the association noted.
In October 2022, 127,000 tonnes of refined palm oil was imported. The oil marketing year begins in November.
This has been happening mostly because of the 7.5 per cent import duty difference between CPO (crude palm oil) and refined oil. While the import duty on CPO is 5 per cent, on refined oil it is 12.5 per cent. This, the SEA said, encourages import of refined palmolein into our country as opposed to CPO.
In a letter written on January 8, 2023 to Sanjeev Chopra, secretary, department of food and public distribution, SEA President Ajay Jhunjhunwala said the Indian refining industry was heavily suffering from very low capacity utilisation and getting transformed into mere packers. “This is seriously compromising heavy investments made in the sector.”
The capacity of the domestic refining industry was 38-40 million tonnes but utilisation was only 18 million tonnes, BV Mehta, executive director, SEA told Down To Earth. He added:
This means just 30 per cent is being utilised. Around two years ago, the utilisation was 60-70 per cent. The finished product is coming in cheap.
“This way the refining industry will be suffering a loss of Rs 6,000 per tonne on importing crude palm oil and converting into refined palmolein,” he shared.
Indonesian exporters of refined, bleached and deodorised (RBD) palm oil enjoyed an advantage of $60 over CPO and in process, they discount palmolein, which acts as a boon for their refiners.
The industry wants the duty difference between CPO and refined palmolein to be increased to at least 15 per cent. “This can be done by increasing refined duty from current 12.5 per cent to 20 per cent without any change in crude palm oil duty. We are hoping that this will be taken up in the upcoming budget,” said Mehta.
This, the SEA said, would not affect the overall imports into the country and the edible oil inflation as CPO will replace RBD imports.
“Needless to say this (import of finished goods) is quite contrary to our prime minister’s clarion call of atmanirbharta and value addition within the country,” said the letter.
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