The Hindu : Business : Panel moots cut in edible oils tariff

Online edition of India's National Newspaper
Wednesday, Feb 22, 2006

Business

Business

Panel moots cut in edible oils tariff

Agriculture Ministry submits dissent note Ministry submits dissent note

NEW DELHI: With a week left for the budget, a government committee on Tuesday proposed a uniform 72.5 per cent import tariff for all edible oils except soya, with a nominal 7.5 percentage point duty differential between crude and refined oils.

Favouring a stable duty structure for at least five years, the committee headed by Chief Economic Advisor Ashok Lahiri recommended that the duty on vanaspati be raised from 30 to 72.5 per cent in a bid to deal with the major problem of "inverted duty structure.''

Duty on soyabean oil

It, however, suggested retaining 45 per cent duty for soyabean oil as it was the WTO bound level.

The committee suggested a uniform 72.5 per cent for all other edible oils as the WTO bound level was much higher, ranging from 75 per cent for rapeseed and mustard oil to 300 per cent for palmolein, palm oil, sunflower and coconut oil.

The representative of the Department of Agriculture and Cooperation has, however, sent a dissenting note, indicating that the proposal on edible oil duty reduction to 72.5 per cent cannot be supported and that, in fact, the rate needs to be raised.

Regretting that wide dispersion of rates and lack of stability in edible oil duties following frequent changes, the committee said considerably lower duties on soyabean oil of 45 per cent relative to the 80 per cent duty on crude palm oil have led to large import of costlier soyabean oil, leading to higher import bill and lower revenue.

For instance, it was "privately profitable'' to import soybean oil at a higher price of $415 a tonne than crude palm oil at $380, causing a forex outgo of $35 a tonne and a revenue loss of Rs. 5,357 a tonne.

The duty differential for imported palm oil because of bilateral trade treaties put the domestic industry at a disadvantage, the committee said.

The duty on palm oil is 80 per cent in India, it is duty free in Sri Lanka and Nepal. While voluntary export restraints constitute a way out, the Lahiri Committee said their track record internationally has not been good.

Convergence of tariffs

"A durable solution lies in convergence of external tariffs in the entire South Asia Free Trade Area (SAFTA), making it a customs union,'' it said.

A temporary solution lies in vigorous outward investment by Indian oil refiners in Nepal and Sri Lanka and rigorous enforcement of the Rules of Origin. — PTI

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