Indian govt restricts refined palm oil imports

Singapore — The Indian government Wednesday announced a new policy restricting imports of refined palm oil products.

While the extent of the restriction was not made clear in the government notice, a market participant said: "Refined palm oil products can only be imported with prior permission or a special license now. Currently, the modalities regarding the permissions required are unclear, and we have to wait and see how the situation develops. As for cargoes landing into India, any olein parcel with a Bill of Lading dated prior to January 8 shall be allowed."

The new policy is effective immediately, and applies to refined palm oil imports from any origin.

Restriction comes after domestic lobbying

The announcement comes after India reduced import taxes on palm oil imports. From January 1, the Indian base import duty on crude palm oil was reduced to 37.5%, from 40%, and on refined, bleached and deodorized olein to 45%, from 50% for palm oil imports from South East Asian countries, under the terms of the ASEAN-India Free Trade Agreement.

This met with strong opposition from the domestic refining industry. In a January 1 press release, the Solvent Extractor's Association of India said: "This action of the Government has come as a blow not only to our domestic palm oil refining industry but to our oilseed farmers as well. After a long time domestic oilseeds had started selling above MSP [minimum support price] and improving farm incomes. Lower import duty would make it difficult to defend MSP and the new found enthusiasm of the oilseed farmers would be dampened. This would be counterproductive and contrary to our stated objective of increasing domestic oilseed production."

Move by indian government expected

"Refiners in India are happy," an India-based buyer said. Others were nonplussed, having expected a move by the Indian government to curb refined palm oil imports.

"Due to the export tax differential on crude and refined palm oil products, the refining industries in the South East Asian countries would benefit, compared to sourcing countries. India, for one, has taken note of it and the government is fully in support of their refineries. I had initially expected safeguard duties to be imposed, leading to an increase in the duty difference," another India-based buyer said.

A Singapore-based trader, on the other hand reported that it would be necessary to find new markets for their refined palm oil products from now on.

"For Indian buyers who have already bought olein which will load after January 8, they will have no choice but to wash out the trade. Some buyers might replace olein with CPO, and CPO prices will rise further. There might be some initial selling-off, but this news is ultimately bullish for CPO prices," the trader added.

The news is also positive for Indonesian sellers because Indian buyers were recently informed not to buy Malaysian-origin palm oil. An India-based buyer said that on Monday, importers were called and told to avoid Malaysian cargoes. "We were told that vessels loaded with Malaysian palm oil may not be cleared by the port authorities from February onward. There might be some leniency for cargoes already on the water, with estimated arrival in India by end of January."

Owner and co-founder of Singapore-based Palm Oil Analytics Sathia Varqa said: "The move was suspected as a strategic move ahead of the February 1 Indian national budget presentation. The trigger for the restriction was the sharp narrowing of the price difference between RBD palm olein and CPO prices, squeezing Indian refiner's margins, prompting lobbying from the industry for the government to take action. Front month CPO futures on the BMD will be sharply hit, but prices will remain supported."

--Anu Das, anu.das@spglobal.com

--Edited by Jonathan Dart, newsdesk@spglobal.com