India increases import duty on refined palm oil from 7.5% to 10%

India finally increases its import duty after months of lobbying by India refiners. Tax differential between crude and refined increases from 5% to 7.5%.

News and view from AmResearch 10 Jan 2014: Bloomberg reported that India has increased the import duty on refined palm oil from 7.5% to 10%. We are not surprised by this development as palm refiners in India have been lobbying for a higher import duty since mid-2013. At that time, the refiners had proposed an import duty of 12.5% on refined palm oil. The Indian Government has given in to the proposal of a higher import duty but at a rate of 10%. Due to the low tax differential between crude and refined palm oil, buyers in India had preferred to import refined palm oil directly instead of buying them from the refiners. It was reported that palm refiners in India were operating at low utilisation rates of only 30%. Companies operating palm refineries in India include Wilmar Adani and Ruchi Soya Industries. We believe that the increase in import duty would not significantly affect the demand for palm oil. India would still be buying palm oil from Indonesia or Malaysia except that there could be some switching from refined palm oil to palm oil in crude form. Currently, the import duty on crude palm oil is 2.5%. The tax differential between crude and refined palm oil would increase to 7.5 percentage points due to the higher import duty on refined palm oil versus 5 percentage points previously.