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Vanaspati units want `25 pc domestic oil norm' scrapped

Harish Damodaran

NEW DELHI, Nov. 22

THE domestic vanaspati industry has sought the abolition of the condition requiring use of a minimum 25 per cent of indigenous vegetable oils by weight in the manufacture of vanaspati on a monthly basis.

The condition was imposed on June 13 this year to regulate unrestricted import of edible oil and boost the use of indigenous oils as raw material for vanaspati-making.

``The mandatory use of a minimum quantity of indigenous oils for hydrogenation may have been relevant when large-scale vegetable oil imports were taking place, depressing price realisations for domestic solvent extraction units and oilseeds growers. But now that import duties of edible oils have been raised, there is no need for this condition and we should be allowed to use 100 per cent imported oil,'' the Executive Director and CEO of the Indian Vanaspati Producers' Association (IVPA), Mr I.R. Mehra t old Business Line.

He said the abolition was necessary particularly in view of the massive import of vanaspati from Nepal. ``The Nepal Government allows the use of 100-per cent imported oils, whereas we can use only up to 75 per cent. Indigenous oils are not only more expe nsive but their prices are likely to firm up further in the wake of the increase in import duties. Thus, we will have to incur a higher cost on the 25-per cent indigenous raw material component,'' he added.

As for the remaining 75-per cent imported oil component, the input cost for vanaspati units would go up because of the decision to hike customs duties on crude oil.

The Government, on Tuesday, hiked the effective import duty on crude soyabean, sunflower, rapeseed-mustard and groundnut oils from 27.5 to 35 per cent, while raising the same from 16.5 to 25 per cent in the case of crude palm oil imported for the manufac ture of vanaspati.

``Vanaspati units in Nepal are already importing their CPO virtually duty-free because their Government provides full refund on the duty paid. On the other hand, we were paying an import duty of 16.5 per cent, which has now been raised to 25 per cent, ag gravating our cost disadvantage,'' Mr Mehra said.

He claimed that while the Nepalese vanaspati manufacturer was earlier enjoying a cost advantage of Rs 50-60 per 15 kg tin because of not having to pay any duty on imported raw material, it would now widen further by about Rs 15 per tin. ``The higher impo rt duty on CPO would translate into an additional cost of roughly Rs 1,000 per tonne or Re 1 per kg, which comes to Rs 15 per 15 kg tin,'' he said.

Mr Mehra said the new duty structure was likely to further augment vanaspati imports from Nepal, which was currently facilitated by the Indo-Nepal Trade Treaty of December 1996 providing complete customs duty exemption on imports from Nepal.

According to him, vanaspati imports from Nepal touched an estimated one lakh tonnes (l.t.) during the 1999-2000 oil year (November-October), accounting for nearly 10 per cent of India's annual production of 13-14 l.t.

``Currently, monthly imports from Nepal are to the tune of 8,000-9,000 tonnes compared to hardly 10 tonnes three years ago. Earlier, while imports were confined to eastern Uttar Pradesh, Bihar, West Bengal and Orissa, now they have even penetrated market s around Delhi and Rajasthan,'' he alleged.

The vanaspati industry is the largest consumer of imported edible oil in the country, particularly CPO and refined, bleached and deodourised palmolein (RBD) from Malaysia and Indonesia. In the 1999-2000 oil year, India's edible oil imports touched a rec ord 44.95 l.t, of which RBD palmolein constituted 22.14 l.t and CPO another 8.28 l.t.

In fact, while RBD palmolein imports fell from its 1998-99 peak of 26.77 l.t, CPO imports rose from nil to 8.28 l.t last year. The bulk of CPO imports were undertaken by vanaspati-makers, especially after the June 12 decision to raise the tariff on all c rude oil to 27.5 per cent, even while maintaining the same at 16.5 per cent for CPO imported by vanaspati units.