By HANIM ADNAN
India may reimpose import duties on vegetable oils, analysts said
PETALING JAYA: Malaysia’s palm oil exports to India will likely register a cutback in the second half of this year due to India’s huge edible oils reserves and a possible re-imposition of import duties on vegetable oils, analysts said.
India had scrapped import duties on vegetable oils in April last year to keep prices at bay after inflation soared and oilseeds production declined.
Analysts said the latest development in the world’s second-largest edible oil consumer after China could disrupt the current healthy flow of local palm oil exports to India, especially during January to April.
“All will depend on the degree of the import tax re-imposition on palm oil. I believe if it is just 5% or 10% (import duty), it will still be manageable.
“However, if it goes beyond 20% on top of the current crude palm oil (CPO) price of RM2,600 per tonne, then exports in the coming months will definitely come down,” said CIMB Investment Bank Bhd analyst Ivy Ng.
Prior to India’s zero import duties regime, palm oil had been slapped with a 20% import duty.
According to the Malaysian Palm Oil Board (MPOB), local palm oil exports to India surged to 970,000 tonnes in 2008 compared with 511,167 tonnes in 2007.
Indian vegetable oil importers were seen increasing their uptakes over the past seven months, far beyond their normal requirement.
“This has resulted in huge edible oils reserves for end-May estimated at 1.7 million tonnes, exceeding the normal level of 1.1 million tonnes,” said an analyst with a foreign-based research house.
Last month, India was believed to have purchased over 800,000 tonnes of cooking oil, of which the bulk of about 700,000 tonnes were refined palm oil and CPO.
The analyst said: “This confirms our view that India’s astounding 76% edible oil import surge in the first four months this year has been for stockpiling rather than for consumption.”
He said Indian importers were busy stocking up on both crude and refined edible oils on fears that the recently-elected government in New Delhi would levy export and import taxes in the upcoming budget to be presented in parliament next month.
“If these taxes are imposed, the price of the commodity will increase more than the levy,” he added.
Meanwhile, a market observer said the export slowdown had started with the local palm oil shipment to India down to 121,000 tonnes in May from 163,000 tonnes in April.
MPOB is expected to release the latest May figures on palm oil export, production and inventory early next week.