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Mumbai (Reuters): Malaysia is set to replace Indonesia as the top palm oil supplier to India in 2019 as New Delhi has been charging lower import tax on refined palm oil shipments from Malaysia, giving Kuala Lumpur an edge over Jakarta, trade officials said.
The rise in refined palm oil shipments will help refiners in Malaysia and bring down inventories of tropical oil in the world’s second bigger producer, but squeeze Indian refiners that traditionally import crude palm oil. India is the world’s biggest importer of palm oil.
In January, New Delhi cut import duty on refined palm oil shipments to 50% from 54%, but Malaysian shipments attract 45% duty due to a Comprehensive Economic Cooperation Agreement signed by the two countries nearly a decade ago.
The duty advantage helped Malaysia to raise its market share in India’s palm oil imports to 52% in the first half of 2019, compared with 30% in 2018, Mohd Bakke Salleh, chairman of the Malaysian Palm Oil Board (MPOB), said on sidelines of a conference in Mumbai. “We are expecting the market share to remain the same in the second half.” India’s palm oil imports from Malaysia surged to 2.59 million tons in the first half, compared with 1.39 million tons during the same period a year ago, according to data compiled by MPOB.
Indonesia has asked India to cut import tax on its refined palm oil shipments to 45% as Jakarta’s share in the Indian market fell below Malaysia’s for the first time.
India primarily imports palm oil from Indonesia and Malaysia and soy oil from Argentina and Brazil. It also buys sunflower oil from Ukraine and Russia and canola oil from Canada. Indian refiners are struggling to operate their plants due to rising imports of refined palm oil from Malaysia, said B.V. Mehta, executive director of the Solvent Extractors’ Association of India (SEA). Refined palm oil shipments are rising as the import duty difference between refined and crude palm oil has fallen to 5% from 10% earlier, Mehta said.
India imported 1.59 million tons of refined palm oil in first half of 2019, up 50% from a year ago, according to SEA.
New Delhi’s refined palm oil imports are likely to jump to a record 3 million tons in the 2018/19 marketing year ending on Oct. 31, up 43% from a year ago, said Mehta, adding “Indian refiners won’t survive unless the government raises import tax on refined palm oil.”
