NEW DELHI, July 10: The centre's decision to cut edible oil import duty could temporarily soften prices, but the government must allow free oilseeds imports to ease prices in the long run, trade officials said on Friday.On Thursday, food minister Surjit Singh Barnala told parliament that India had decided to cut edible oil import duty to 15 per cent from 25 per cent from July 10.The decision was prompted by a rise in domestic edible oil prices to record levels.
A senior food ministry official said the duty cut would apply to all edible oils currently imported under the open general licence scheme.
"The duty cut will apply to all oils which are currently under open general licence, such as palm olein, sunflower and rapeseed," said the official, who asked not to be identified.
BV Mehta, executive director of the Solvent Extractors Association of India, said the duty reduction would be offset by a rise in international edible oil prices. "Malaysia will jack up the price in no time and the real benefitwill not be available to the Indian consumer," he said.
India imports more than 1.5 million tonnes of edible oils annually -- mainly palm olein from Malaysia and Indonesia, and soft oils from South America.
"If the government had taken a decision to allow the import of oilseeds rather than cut the duty on oil, that would have augmented the overall oil availability and also satisfied the domestic crushing and processing industry, which operates at 35 percent of its capacity," Mehta said.
India allows free import of edible oils but does not permit imports of oilseeds or oil-bearing material.
Navinbhai Shah, president of the Bombay Oilseeds and Oil Exchange Ltd, said the duty cut would have only a short-term impact on prices and spark a surge in import orders.
"There will be a little rise in Malaysian prices as we will scramble to buy," Shah said.
"The prices will go up in Malaysia and automatically a price adjustment will take place. You will see some slide in Indian prices and rise in Malaysianprices."
"I think the prices will reach the same levels within two to three weeks," Mehta said.
Palm olein oil traded at 38,000 Rupees ($894) per tonne, sunflower oil at 43,000 Rupees a tonne and refined sunflower at 48,000 Rupees per tonne before the duty cuts.
Trade officials said prices were vulnerable because the trade was heavily dependent on imports. Shah said India has already imported 700,000 tonnes of edible oil in 1997/98 (November-October).
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
