Malaysia fails to persuade India to cut palm oil duties
Malaysia fails to persuade India to cut palm oil duties
KUALA LUMPUR (Reuters): India's move to scrap import duty relief for ailing vanaspati firms importing crude palm oil shows the futility of Malaysia's efforts to persuade New Delhi to cut edible oil import duties, industry sources said on Thursday.
This was a second blow in less than a month to Malaysia, the world's largest palm oil producer, after its much publicized project to burn up to 400,000 tons of crude palm oil this year to support prices turned out to be a disappointment.
India Finance Minister Yashwant Sinha told parliament on Wednesday he was ending the 55 percent concessional duty for financially troubled vanaspati units announced on February 28 in the 2001/02 federal budget. Vanaspati is hydrogenated vegetable oil.
The move surprised the Malaysian market because it was announced just after Primary Industries Minister Lim Keng Yaik and his Indonesian counterpart, Trade and Industry Minister Luhut Pandjaitan, ended a visit to India where they asked New Delhi to cut the edible oil import duty to 45 percent.
All vanaspati makers will now pay a duty of 75 percent. "This means Mr. Lim's visit has absolutely no effect," said one trader in Kuala Lumpur.
Malaysia and Indonesia, traditionally arch rivals, have agreed to form a world palm oil association to help lift prices and work together to promote the oil. Both ministers are now visiting China to lobby for better access for palm oil.
Indonesia is the world's second largest palm oil producer.
India was Malaysia's main palm oil buyer in 2000, taking 2.03 million tons.
In the February budget, India raised the import duty on crude edible oils to a uniform rate of 75 percent from the current range of 35 to 55 percent in order to protect the industry.
The duty on refined edible oil was increased to 85 percent from a range of 45 percent to 65 percent. The duty on soybean oil remained unchanged at 45 percent due to India's commitment to the World Trade Organization.
Traders said the Malaysian palm oil market was now focusing on the stiff competition with soybean oil, which has been flooding the global market due to South American harvests, and was abandoning the plan to burn palm oil to lower stocks.
Malaysia earlier said state utility firm Tenaga Nasional would each month burn 50,000 tons of crude palm oil mixed with medium fuel oil, a type of diesel oil used by the firm's generators or boilers.
The government said it was sticking to its plan to use up to 400,000 tons of the oil this year, but added it would find other industries which can use crude palm oil because most of Tenaga's power stations had been changed into gas firing.
Malaysia's palm oil futures ended unchanged on Thursday in directionless trade due to the absence of big players and prospects of more soyoil oil imports by India in the coming months, traders said.
At the close, benchmark third-month July futures were unchanged at 768 ringgit ($202.10) a ton after trading between 761 and 770. Volume stood at 719 lots.
In the physical palm oil market, May crude palm oil (CPO) for the southern region was offered at 755 ringgit a ton against bids at 750. Trades were done at 750 and 752.50 ringgit.
May CPO (central) was offered at 750 ringgit a ton against bids at 745 and trades were reported at 745 to 750.