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.