Palm oil tax war expected to boost Indian imports

Palm oil tax war expected to boost Indian imports

SINGAPORE (Reuters): An export tax war, set to intensify soon
between the world's two largest palm oil producers and exporters,
could sharply boost Indian edible oil imports and put pressure on
its government to raise import duties yet again.

As Malaysia and Indonesia battle it out to gain a larger chunk
of the Asian oils market by planning liberalized tax rules on
crude palm oil exports, the expected resulting fall in global
prices could more than offset recent increases in duties by India
to curb surging imports, traders said on Monday.

India, the world's largest edible oil importer, could see
imports just surpass last crop year's record level of 4.39
million tons.

"I am sure that this kind of price war will benefit countries
like India," said one Singapore trader. "If the taxes are eased,
we will certainly see Indian imports rising sharply."

India imported about three million tons of edible oils in the
first nine months of the oil season 1999/2000 (November-October)
compared with 2.98 million tons in the same year-ago period,
according to industry sources.

But since the Indian government introduced differential
duties, crude palm oil imports have risen to about 53 percent of
total oil imports from 31 percent in the beginning of the oil
season.

"With international prices expected to fall because of plans
by Malaysia and Indonesia to ease export taxes, Indian importers
will just be waiting for the opportunity to grab the contracts at
lower prices," said one trader.

Palm olein was offered at $290 a ton fob for nearby September
shipment on Friday compared with around $740 a ton a year ago.
CPO was offered at $302.50 a ton cif on Friday compared with $375
a year ago.

In June, India raised import duties on edible oils but the
increase fell short of industry expectations and traders said it
had little effect on imports.

The effective duty for RBD palm olein and refined oils after
the increase worked out at 44 percent, and at 27.5 percent for
crude oils.

The Indian industry has favored an effective import duty of 60
to 80 percent on refined oils and 38.5 percent on crude oils.
Government officials have said the demand is being looked into.

"The Indian government knows that to a large extent, the
recent increases in import duties have not really solved the
purpose. Now with this price war on, it has to act fast if it is
at all serious to check excessive imports," said another edible
oil trader.

Traders said Indian imports of palm oil, slowing in recent
months because of increased competition from soft oil shipments
from Brazil, Argentina and the United States, could again see a
revival.

"Malaysian exporters should think of measures to prevent their
market share from falling in Asia due to the rising competition
from soft oils," said one exporter. "They should look at a good
number of contracts until India raises import duties."

Traders said the price war could benefit Indonesia more than
Malaysia.

"As India is increasing its imports of crude palm oil after
duty differentials, their importers are find it easier to import
from Indonesia than Malaysia because of the relatively easier
regulations," said one trader.