Edible oil industry body SEA has written to the Union food minister Piyush Goyal to increase import duty on refined palm oil to 20 per cent from the current 12.5 per cent in order to protect domestic refiners.
The Solvent Extractors' Association of India (SEA) pointed out that the duty difference between crude palm oil (CPO) and refined palm oil is only 7.5 per cent, resulting in higher imports of refined palm oil and lower capacity utilisation of the domestic refining industry.
"The low duty difference of 7.5 per cent is a boon for Indonesian and Malaysia refiners. The duty difference between CPO and refined palmolein/palm oil needs to be increased from the current 7.5 per cent to at least 15 per cent.
"This may be done by increasing RBD Palmolein duty from the current 12.5 per cent to 20 per cent without any change in CPO duty," said the letter, signed by SEA President Ajay Jhunjhunwala and Atul Chaturvedi, Chairman of Asian Palm Oil Alliance (APOA).
The association has argued that a 15 per cent duty difference would help reduce refined palmolein imports and replace the same with crude palm oil imports.
"Overall imports into the country would not be affected and it will have no impact on edible oil inflation. On the contrary, it will help improve capacity utilisation and employment generation in our country," SEA assured.
The association urged that the minister look into this issue and take steps to "save the domestic palm oil refining industry from ruin".
India imports large quantities of palm oil from Indonesia and Malaysia. Traditionally, the CPO is imported by Indian refiners to cater to the ever-increasing demand for Palmolein in the country. Importing CPO helps in value addition within the country apart from generating employment.
India imported 18,40,540 tonnes of refined palmolein in the 2021-22 marketing year (November-October) as against 6,86,340 tonnes in the previous year, SEA cited to make its case. Imports of CPO fell to 59,94,346 tonnes from 74,91,193 tonnes.
Sharing the plight, the SEA said that the current import duty difference between crude and refined oil of 7.5 per cent encourages the import of refined palmolein as opposed to the CPO.
The import of finished goods is contrary to our national interests and is seriously affecting the capacity utilisation of domestic palm refining industry, it added.
The main reason for the rise in refined palmolein imports is the encouragement given by exporting countries (Malaysia and Indonesia) to their industry.
"They have kept high export duties on CPO and low export duty on Palmolein (finished product)," the SEA president said.
The import duty difference of 7.5 per cent levied by India between CPO and refined palmolein is insufficient to block the imports of refined palmolein.
"Our palm refining industry is suffering from very low capacity utilisation and getting transformed into mere packers and seriously compromising heavy investments made in this sector. We feel this situation requires course correction to avoid investments turning sour and adding to NPAs," SEA said.
The association said this is contrary to the Prime Minister's clarion call of Atmanirbharta and value addition within the country.