India restricts Malaysia palm oil imports

India has imposed restrictions on refined palm oil imports from Malaysia, although crude palm oil (CPO) imports from the country will continue. The move is being viewed as a major step to benefit the domestic industry in the country.

The Union Ministry of Commerce and Industry on Wednesday issued a notification prohibiting the import of commodities falling under the Exim Code 15119010 and 15119020 -- refined bleached dehydrated palm oil and refined bleached dehydrated palmolein. 

It is believed that this decision will create a war between Malaysia and Indonesia over palm oil prices as India is a major importer of palm oil. But, Indian businessmen say that crude palm imports will increase if refined oil imports from Malaysia stop, which will ultimately benefit the domestic industry here.

For the purpose of reducing refined palm oil imports and increasing crude imports, the domestic industry has been demanding a difference of at least 15 per cent in the import duty of both.

Atul Chaturvedi, the president of the Solvent Extractors Association Of India, welcomed the government's decision. On being asked about the benefits to the domestic industry, Chaturvedi told IANS: "If refined goods imports decrease, it is natural that crude palm oil imports will be higher, and this will benefit the domestic industry." 

"When Malaysia had the benefit of five per cent duty earlier, then about three lakh tons of palmolein was being imported every month, but when the benefit of five per cent duty ended, Indonesia and Malaysia imposed a uniform duty on imports. After this, the import of palmolein from Malaysia has come down to about 1.25 lakh tonnes," said Chaturvedi.  

Under the Comprehensive Economic Cooperation Agreement between India and Malaysia, there was a five per cent exemption in duty on palmolein imports from Malaysia, which was withdrawn by the Indian government in September last year.

He futher added: "The ratio of palm oil imports from Indonesia and Malaysia is 70:30, that means India imports 70 percent palm oil from Indonesia and 30 per cent from Malaysia. The government's decision to reduce about one and a quarter million tonnes in the import of refined palmolein means that the CPO imports will increase by one and a quarter million tonnes."

Following this decision of the government, all the CPO deals on the Indian futures market Multi Commodity Exchange were trading on a fast pace. The January contract of the CPO was up by Rs 7.30, or 0.89 per cent, to Rs 830 per 10 kg. Earlier, during the trading hours, the CPO price rose to Rs 835 per 10 kg, which is a record level. In the last one month, the CPO price on MCX has increased by more than 14 per cent. 

On the other hand, the government's decision to ban the import of refined palmolein from Malaysia was being seen as the fallout of the tensions between the two countries. 

The relations between the two countries have soured a bit since Malaysian Prime Minister Mahathir Mohammed's anti-India rant on the Kashmir issue at the UN last year.