Industry is calling for land diversification policies to be put in place to battle cheaper imports, tax breaks, and a ban on consumer palm oil products coming into the country.
India was negatively impacted by Indonesia's decision to slash the maximum export tax on refined, bleached and deodorised palm oil (RBD) to 10%, while the rate for crude palm oil was left at 22.5%.
As a result, Indian food industries began importing more of RBD palm oil for the festive season in India, which stretched from October to the New Year, putting local refineries in trouble.
This new tax policy further dented the Indian edible oil industry, which has already been hurt by inefficient domestic policies and lower yields, a senior executive with a vegetable oil processors told FoodNavigator-Asia.
The executive, who is also a part of the Solvent Extractor's Association (SEA), said that Indonesia's motive is to encourage its own processing industry, but it is crippling the local Indian processing industry.
“Over 10m tonnes of edible oil worth about US$8bn was imported into India last year [2011]. This is crippling the 15,000 oil mills and other refining units in a very harsh way. Quick measures are needed,” he said.
According to ministerial data, India imported bout 6 million tonnes of crude palm oil before 2011 from Indonesia, while Indian refiners have an annual capacity of 15 million tonnes.
Industry wants wider changes
First and foremost, he said, the government would have to lay out policies which encourage the diversification of land use to grow oilseeds as much as food grains adding that only a quarter of the crop is irrigated now.
“We must increase availability from domestic resources. We have to increase capacity and production,” the SEA executive said.
To begin with, the industry has asked for a formal proposal to the Ministry of Finance to ear mark US$1.5bn to expand the area under oil seed cultivation from the current US$57m.
In addition, the industry has requested the government to facilitate an oilseeds expansion program where farmers are provided with the necessary agri inputs to achieve higher productivity.
“Most important is our demand for an income tax deduction to be granted to companies undertaking such programmes for their farmer base. We also want the complete ban on the import of edible oils in consumer packs,” he said.
The proposals are in addition to the industry's existing demand of US$1,200 per tonne tariff value on RBD palm oil, against current norms where importers are taxed 7.7% duty based on the tariff value set at US$484 a tonne.
“All these demands have been submitted to the government, which has been requested to address them in the upcoming Budget [which will be released in late March],” he said.