India cuts import duties on crude palm oil to 37.5%, refined to 45%

India will cut the import duty on crude palm oil from 40% to 37.5% from January 1 and will slash duties on refined palm oil from 50% to 45%, India’s Ministry of Finance said Tuesday.

The lowering of import duties follows a trade agreement that India – the world’s largest vegoil importer – struck with the ASEAN trading block and which was signed off back in 2009.

As part of the bilateral deal, India cut import tariffs on crude and refined palm oil as well as a number of other key export commodities from ASEAN countries on an annual basis between 2010 and 2020.

The cut comes at a time when global palm oil prices are trading at a three-year high following a stall in production growth and growing demand on expanding biodiesel mandates – giving some breathing room to importers.

“In my opinion, prices will most probably move south,” an Indian vegoil broker said.

The cut means, however, that the duty difference between refined palm oil and crude palm oil will be narrowed from 10-percentage points to 7.5 points which could trigger another surge in palm olein imports – undercutting domestic refiners.

On January 1, 2019, the Indian government slashed import duties – in line with the same agreement – and narrowed the duty difference to 5-percentage points, which sparked a flood of refined palm oil products from Malaysia.

To halt the surge and support local refiners, India temporarily hiked import taxes on Malaysian refined palm oil back in September from 50% to 55% for a period of 180 days to ensure a 10-point difference.

The Solvent Extractors' Association of India (SEA) – India’s main vegoil trade body – urged its government mid-December to ensure at least a 10-point difference.

“The duty difference of 7.5% is not sufficient for maintaining the health of our palm refiners,” the SEA said.

Industry sources expect that the Indian government might tweak import tariffs again in the upcoming budget in February and increase the duty difference between crude and refined palm oil.