Even as New Delhi gropes for effective measures to protect the domestic vegetable oil refining industry from the adverse effects of low-priced refined palm oils from Indonesia flooding the market following a sharp reduction in export duty with effect from October 1, a lesser known and lesser understood issue is the threat of refined palmolein in consumer packs entering the country in a big way.
Currently, Indian importers are receiving offers for refined palmolein in consumer packs at prices of around $1,250-1,300 a tonne. However, at this rate there is no price parity for the imported oil considering domestic market conditions.
Consequences
However, offers for refined palmolein in consumer packs are unlikely to stay at the same price level. There is a possibility that offer prices may drop to levels that may find parity in the Indian markets. In the event, one can expect large parcels of refined palmolein in consumer packs to swamp the local market.
The consequences of such a development on the domestic refiners and packers can well be imagined.
There are a large number of small and medium size packing units that depend on local refineries for their packing business.
Many of them run the risk of being wiped out of business.
Quality issue
Another issue relates to inspection of quality. Even when vegetable oils are imported in bulk, there always are issues relating to quality of the imported oil.
Samples have to be drawn, analysed and cleared by the Port Health Organisation. Customs authorities too, occasionally draw samples and analyse for quality.
When oil is packed in small-size consumer packs of say one litre, sampling and testing for quality is going to become rather tedious. There is risk sub-standard oil could find its way into the local market if sampling and analysis is not done strictly as per standard statistically acceptable procedure. In any case, oil stored for a long time (say four-six weeks), begins to deteriorate in quality.
Due to oxidation, the peroxide value tends to rise resulting in rancidity of oil.
So, flow of refined palmolein in consumer packs from Indonesia may not only hurt the business interests and prospects of edible oil packers here, but also raise the risk of quality for consumers.
Customs duty
India seldom imported edible oil in consumer packs simply because the rate of customs duty as notified by the Finance Ministry was always applicable to ‘edible oil when imported in bulk'. A couple of years ago, for mysterious reasons, the words ‘when imported in bulk' were deleted.
As a result, today if refined oils are imported in consumer packs, the same rate of customs duty as applicable to bulk, namely 7.5 per cent will be levied on consumer packs also.
This anomalous situation deserves to be corrected immediately. Imported oil in consumer packs should attract a higher rate of customs duty than oil in bulk to protect domestic small-scale packers.