Almost one month ago, the government had threatened of lowering the edible oil import duty, if the prices did not come down from their recent highs.

This had created an all-round fear in the edible oils market, for,lower import duty would have helped the government to increase the availability of edible oils in the country thorough cheap imports, more so when the domestic production of oilseeds is expected to be lower than last year.

Currently, edible oil imports attract a total of 25 per cent duty (including two per cent surcharge and other levies).

The fresh eight per cent import duty would result in a total import levy for edible oils of around 33 per cent.

However, this fresh impact would be almost nullified if the product is imported by a trading-importer and not by actual user. Under clause 11 of the explanatorynotification issued by the ministry a day after the budget the importer needs to make a declaration to this effect.

According to the clause, `all goods falling within the first schedule, which are imported for subsequent sale as such and the importer at the time of importation makes a specific declaration to that effect in the bill of entry' will be exempted from the fresh levy.

Thus, the import duty will not be levied on trader-importer, while it will be levied on the actual user importer.

"The oil importing community will not have any impact of the fresh levy," said BV Mehta, president of The Solvent Extractors' Association (SEA) of India.

Reeling under the burden on excess installed oil extraction capacity, the SEA had lobbied hard with the government to maintain a status quo on the duty front, without which cheap oil inflow would have adversely affected the ailing industry. "We are happy that the government could understand our proposals", Mehta maintained.

Over the past few years, the import ofedible oils has moved in the hands of the trading community, Mehta said.

Accordingly, as much as 90 per cent of edible oil imported in the country is by the traders, he added.

The balance is imported by actual bulk users like Godrej, Hidnustan Lever, Marico, Liberty Oils and few others.

These bulk users had hoped to benefit from falling international prices of edible oils. The new levy will disturb their import plans.

In 1996-97, India imported around 1.70 million tonnes of edible oils, around 15 per cent higher than in the previous year.

Now that the trader-importer will be exempt from the eight per cent import duty, the actual who will feel the pinch, more so with a weakening rupee against the US dollar, will be forced to rework their edible oil import strategy so as to reduce the impact of the new levy, according to Mehta.

The bulk edible and industrial oil users importing edible oils will now avoid buying their requirements directly from the global markets. Instead, they will route theirimports through international trading agencies like Mitsui of Japan, Wilmar of the USA among others, or appoint reputed domestic traders markets, he added.

Alternatively, these entities could continue to import as in the past, but with a slight change. They could sell the same to the other actual user and avoid the duty payment.