Budget may cut oilseed import duty, say traders

The government may cut import duties on oilseeds in this month's Union Budget to reduce dependence on edible oil imports and give a new lease of life to the beleaguered local processing units, traders said on Thursday.

The oil industry has demanded a drop in the levies on oilseeds to 15 per cent from 35 per cent, they said.

"The government is considering our proposal," said a leading industry official, who declined to be identified. "The duties may be reduced in the Budget."

The government will present its annual Budget on February 28.

B V Mehta, executive director of the Solvent Extractors' Association of India, said this was needed to ensure availability of enough raw material for processing units, which are working at only 35 per cent of the their capacity.

"The government is not opposed to this idea," he added.

The capacity utilisation may rise to 40-50 per cent with a cut in the duties to 15 per cent, traders said.

The local industry is facing an oilseed shortage as domestic production is not sufficient to meet its processing needs.

India produced an estimated 19.4 million tonnes of oilseeds in 2001-02 (November-October), up from about 17.5 million a year earlier, according to trade figures.

OIL IMPORT DUTIES

But the government is unlikely to change the import duty structure of edible oils in the Budget, traders said.

"Nothing is going to happen in this Budget which will disappoint Malaysia," said Sandeep Bajoria, former president of SEAI and managing director of Bajoria Fats and Proteins Ltd.

The country buys nearly 45 per cent of its total edible oil demand, mainly from Malaysia and Indonesia.

It imported a record 4.83 million tonnes of edible oil in 2000-01 (November-October), up from 4.49 million a year earlier.

"We are comfortable with the current edible oil duties. Now we want some stability in the government policies," Bajoria said.

The government changed edible oil levies five times in the past two years, traders said. India imposes a basic import duty of 85 per cent on refined oil, 65 per cent on crude palm oil and 45 per cent on soy oil.

The SEA has also demanded that the government should create an Oilseeds and Oil Development Fund, which could be utilised to induce farmers to produce more oilseeds.

Traders said the government should also raise the minimum support price for oilseeds to encourage farmers to shift to oilseeds from grains.

Under the support price scheme, government fixes a floor price for commodities and intervenes to buy the produce when market prices fall below this minimum level.

Traders said the government has raised support prices for grains by over 155 per cent in the past decade, but for the oilseeds the hike was only about 90 per cent in the same period.

"The shift to oilseeds production will also reduce bulging food stocks," an oil trader said.

India's foodgrains stocks totalled about 60 million tonnes as on November 30, 2001 against the buffer requirement of 20 million.

Reuters

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