The edible oil industry has urged the Government to bail it out from the crisis triggered by an unfavourable import duty structure in India and exporting countries.
The difference between crude palm oil and refined palmolein prices has dropped to $5 a tonne from $40 as exporting countries such as Malaysia and Indonesia slashed duty on refined oil to promote refining in their country.
For instance, Indonesia levies an export duty of 10.5 per cent on crude palm oil and four per cent on refined oil.
The duty difference leaves a margin of 6.5 per cent or $65 a tonne for sellers to attract orders.
In India, the Government charges an import duty of 2.5 per cent for crude palm oil and 7.5 per cent on refined oil.
Refiners are left with a margin of just five per cent which is almost wiped out due to high operating cost and huge swing in rupee-dollar movement, said B.V. Mehta, Executive Director, Solvent Extractors Association.
The country has edible oil refining capacity of about 15 million tonnes a year.
They are located largely in port cities such as Kandla, Kakinada, Haldia, Krishnapatnam and Mumbai.
Dinesh Shahra, Founder and Managing Director, Ruchi Soya Industries said that refining industry in India is bleeding and requires urgent Government intervention.
The industry provides employment to over five lakh people, he said.
Between April and June, refined palmolein imports more than doubled to 9.23 lakh tonnes against 3.90 lakh tonnes during the same period a year ago.
Given the crisis in the industry, the Association has urged the Government to raise the duty difference between crude and refined palmolein to 14 per cent.
“Whatever be the import duty on crude and refined palmolein, the duty difference should be at 14 per cent for the industry to survive,” said Mehta.
Edible oil imports are expected to touch Rs 60,000 crore this oil year ending October against Rs 56,000 crore last year.
While edible oil prices have crashed in last one year, the sharp depreciation in rupee against dollar and higher volume may push up import bill, he said.