NEW DELHI (Dec 28): India will likely cut import duties on palm oil from next year in a boost to top growers Indonesia and Malaysia, according to people with knowledge of the matter.
Crude palm oil duties for Malaysia will be cut to 40% from 44% from Jan 1, while a levy on the refined variety will be reduced to 45% from 54%, the people said, asking not to be identified as the information isn’t public. A separate agreement with ASEAN, or Southeast Asian countries including Indonesia, will see crude palm oil taxes cut to 40% while the duty on refined products will be reduced to 50%, they said.
Benchmark futures in Malaysia climbed almost 1% on Friday on optimism that India, the world’s biggest buyer of the commodity, will increase imports. Prices have slumped about 15% this year due to rising supplies from Indonesia and Malaysia and lackluster demand from China and India. Bulls are betting on a bounce next year, even though the tropical commodity may have to endure a rough patch first.
“The duty cut will attract buying from India, but if the duty is reduced, palm prices in origin countries will rise,” said Anilkumar Bagani, research head at Sunvin Group, a Mumbai-based broker and consultant. Futures may spike toward RM2,200, but may then start to decline because of a slow reduction in the pace of production and higher end-stockpiles, he said.
The government may impose some measures to minimize the impact of lower duties on domestic growers, the people said. A spokesperson for the agriculture and food ministries declined to comment.
Indian oilseed processors are opposed to any reduction in import taxes as it hurts local farmers, according to the Solvent Extractors’ Association of India. There should be a duty differential of 10% between crude and refined oil, the association says.
The Indian government is evaluating a request by Indonesia to keep import duties on refined products at the same level as Malaysia. In return, Indonesia has offered to buy sugar and rice from India.